China’s Economic Reforms Have Hit a Wall | RealClearWorld

The culprit is massive state intervention. In 2013, Chinese President Xi Jinping promised that the market would play a decisive role in the allocation of resources. In fact, Communist Party and government bureaucrats have increased, not decreased, their role in the economy via industrial policy and mercantilism, and factory closures and production cuts are now the purview of policymakers rather than businesspeople. Under the “Made in China 2025” plan and other similar initiatives, billions, if not trillions, are being thrown at strategic industries from semiconductors to artificial intelligence. That is why, for example, almost two dozen Chinese provinces are investing simultaneously in fabrication facilities to pump out memory chips. Companies and research institutes are filing worthless patents in record numbers because they receive a fee from bureaucrats for doing so. And state-backed credit is still flowing freely to high-priority projects around the country, which is why the economy grew at 6.9 percent in the first quarter of 2017 despite tepid private-sector enthusiasm.

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China’s Economic Reforms Have Hit a Wall | RealClearWorld