What direction for reforms in China? CEPS Commentary, 9 January 2014

Following the recent ‘third plenum’ in China, CEPS Director Daniel Gros finds that China has reached a difficult crossroads in terms of making the necessary reforms that will foster continued growth and productivity. Continuing in the direction that so far has been followed with astounding success, namely giving the market a greater role and opening to the rest of the world, might no longer be sufficient. He points out, for example, that combating pollution requires more state intervention, not less. And similarly, strengthening a huge, potentially unstable, financial system requires stronger oversight and some continuing separation from the global financial system. Navigating this change in the right direction will be crucial not only for China, but also for the global economy.