China’s Challenges
The gradual and dual-track approach , along with accession to the World Trade Organization (WTO) , has brought both opportunities and challenges for China. Privatisation, State-Owned Enterprises (SOEs), and Banking Privatisation has increased competition. China has privatised 60% of its industrial SOEs . This rise in private sector competition has pushed many SOEs toward bankruptcy . Historically, China bailed out failing SOEs with soft loans via state-owned banks (SOBs), which contributed to inflation . However, banking sector reforms mean banks now focus on commercial viability before issuing loans. Although privatisation led to unemployment , surprisingly, privatised SOEs laid off 11% fewer employees than traditional SOEs. Notably, the older SOE sector hasn’t shrunk significantly — partly due to soft loan constraints and partly because the government has reallocated resources from productive sectors to compensate losses in transforming sectors. Rule of Law and Regulatory...