Heard on the Street: China’s economy is slowing but, without reforms, stimulus may just help the rich get richer in an already unequal society
By Nathaniel Taplin Sept. 30, 2019 5:30 am ET Deng Xiaoping, who launched China’s economic reforms, famously said that it was fine for some people to get rich first. As long as everyone got rich eventually, it was a price worth paying for the communist leader.
Two subtle changes in China’s economy tell the story. Following a long fall from 2008 to 2015, China’s Gini Coefficient, a measure of income inequality, has begun rising sharply again. Second, since 2016 housing prices have mostly grown much faster than incomes, the opposite of the situation from 2011 to 2015. Young home buyers in China have sources of support that Americans lack; parents often contribute.
Policy makers, aware of the ugly side effects, have been far more restrained responding to this latest slowdown. Worryingly, however, they continue to duck bold measures to fix the banking system or slim down the state sector. More export-led growth could provide a solution, but Beijing’s unyielding approach to trade disputes—and President Trump’s erratic deal making—have undermined that, too.
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