China’s Trapped Transition

I had an opportunity to attend a presentation by Minxin Pei on his new book China’s Trapped Transition: The Limits of Developmental Autocracy.

Minxin Pei refutes three popular “myths” associated with China’s current economic and political situation:

1. economic growth inevitably leads to political liberalization
2. gradual economic reform in China has been more effective than “Big Bang”
3. China follows a development state model aka East Asia model

Particularly interesting to me was the discussion on the first issue – after all, it relates to what CIPE deals with in its programs as well as to my beliefs in the power of free markets and the spirit of entrepreneurship.  My take on the issue is that economic growth does not lead to political liberalization – economic reforms do.  And there is a big difference between implementing economic reforms and achieving long term economic growth and simply enjoying economic growth without economic reforms.  In that sense, linking the by-product – economic growth – to political liberalization is not the right way to go if one does not look at the root sources of economic growth. 

I am yet to read the book, but judging from the discussion today its an interesting take on the current situation within China, certainly less upbeat than most people think.  Minxin argues that growth in China is bound to decline in the coming decades – it is unsustainable within the current political system, which resembles, according to him, a “decentralized predatory state.”  While he seems to be generally pessimistic on China and its growth prospects, Minxin offers an alternative for investors which is not that far away.  What is it?  Try India (subscription only).