Cracking the China Conundrum: Why Conventional Economic Wisdom Is Wrong

As we might expect of product of Yale and Princeton, the author's political perspective is conventional, but his approach to China's economy is refreshingly objective and balanced and his years as the World Bank's China guy has given him unique insights into many vexed and misunderstood aspects of the world's most dynamic, controversial economy.Huang cracks the 'corruption conundrum'–how a country can be both corrupt, solvent and socially progressive–cleanly, clearly and logically.Ditto the 'debt conundrum' and many others.The book not only demythologizes China's economy, it clarifies and explains it simply and graphically in charts so good that I have reproduced one here..

There is no way to summarize the analysis of Yukon Huang for what he brings to his various topics of discussion is the elaborate interplay of the forces that make the PRC system and its Economy in particular unique.He gigantic contribution is being able to see further into this complexity than most other authorities because for him the System is just that, a form of organization with a unique structure. There was, in the days of the cold war a field of study, Comparative Economic System that was ideology free in essence; it was the results and the problems that needed explaining. Huang must have known it.A country he left as a student during and after World War II was an interesting area to return to much later working for the International Monetary Fund as a scholar.Trained at Princeton and Yale in Economics he carries the intellectual baggage of that trade but he observed that many leading authorities predictions, such as Harvard’s Kenneth Rogoff,* that China's unbalanced heavily indebted system would some collapse did not ring true.This publication is drawn from his years of publications to be found in the WSJ, Foreign Affairs, Financial Times and such. His foot notes reference the enormous research available from the World Bank, I.M.F. that is available on the Chinese Economy; they treat the data usable; Huang believes the growth rate is often understated for reasons given.The pleasure of this work, if you are somewhat familiar with the story, is how clearly he explains the interaction of all the parts and how regional and central controls support and resist one another. His analysis a pleasure to read and convincing. For Economist a must.(If the subject is one you wish to master you may want to add another ideological free study that takes the parts of the System apart –A German research project edited by Sebastian Heilmann, China’s Political System, for fine details.)*Economics’ quest for scientific predictability can leads to public policies with deviating effects.Such as the key study by Carmen Reinhart and Kenneth Rogoff, empirics which were used to make the case for the necessity of austerity adapted as policy by the E.U. and later found defective when a graduate student redid the study.For another enjoyable economic work see: Austerity: The History of a Dangerous Idea by Mark Blyth.

China's growth model continues to draw a wide range of opinions on issues like its sustainability and the medium term potential trajectories. So far reflecting on the history of western academics and their historical predictions, one does not see much accuracy. That of course could be due to timing, luck or more seriously mis-assessment. Yukon Huang offers a view on the policies of China that stem from what he perceives as the context that led to the policy decisions. This is very valuable as reading western laissez fare capitalists talk about what various economic aggregates should be if things were done their way is neither illuminating or nor relevant. The author discusses some major issues that China faces and that critics point to and discuss them in a fairly broad manner trying to be even handed rather than dogmatic about what the inevitable consequence of the current combination will be if not solved immediately.The author firsts notes that it is extremely difficult to analyze China as though its a monolithic country that lends itself to easy causal analysis. The sheer size of the country coupled with its extremely fast growth record over the last 2 decades has no precedent and so claims about what the right policy mix is, are most certainly shallowly reasoned but more importantly off mark in accuracy. The author highlights intrinsic value differences between western liberalism and certain governance priorities from China that could be deemed more utilitarian in view. The author documents the history of China opening up and its early growth model. The author details the pragmatism of the approach but also highlighted some of the issues faced after the Asian financial crisis. The author discusses the concerns on debt and discusses the criticisms on the investment consumption ratio in China, which is heavily skewed towards investment. The author addresses the concerns from a practical standpoint noting that one should look at consumption growth, which has been impressive at low double digits for a very long time. To hypothesize a different investment consumption mix is not a policy. The author notes that China's imbalances can be seen from the lens of having sequential priorities; first to modernize, then to rebalance. The author makes a reasonable case but it surely is not a definitive argument and there is no avoiding the potential issues faced by China's hugely expanded monetary base. The main takeaway is not that the author thinks China is unique in all its forms but rather one should not come to hasty conclusions as there is a huge mix of conflicting priorities and factors at work. The author discusses some topical issues like the capital and trade account and largely dismisses them. He highlights the multi-lateral trade issues faced by the US and accounting issues do to China being an assembly hub rather than the intellectual property/value creation hub. The author includes charts highlighting on a global imbalance basis where the largest imbalances are, which put China behind Germany as a percentage of global GDP. The author also discusses foreign investment and outbound flows from China. These are also quite topical issues but as the author points out, largely immaterial when referencing Europe China FDI. The author also spends some time discussing the geopolitical repercussions to China's rise, these further give a broader background to the economic issues that often flare up but are manifestations of a changing global power landscape.Cracking the China Conundrum gives a more open minded perspective on China, its political economy and its potential future trajectory than must of the recent western free market academic economists have assumed. One should not read this and come to the conclusion that everything is fine- there are some real issues that China faces and that it hasn't faced them yet abruptly is not reason for complacency on the need for reform. The growth miracle is unprecedented, but so is their demographic imbalance that awaits them in 2 decades. To get a sense of the complex balances that have been considered when policy makers have navigated the economic landscape one should read this book. It is readable, relatively even handed and reminds the reader that China has a complex set of conflicting priorities; one shouldn't be singularly focusing on the failures or successes.

Excellent insight into China"s economic situation with facts that back up the statements and issues about what China does, how China's reform is progressing, amd changes in their economic model......Excellent data from an insider who worked in China as director of the World Bank in China. I found his writings easy to read and understand and gave me a better perspective of China and where she is headed and how she has economically performed. Yukon goes into the 'why' China does things. China's mistakes and successes are discussed.. I recommend this book "Cracking the China Conundrum" who want to know from someone on the firing line instead of a 'reference' author or conspiracy addict.

This is the first year that I have really been interested in understanding China's political and economic progress over the past 40 years. This book is scholarly, but highly readable. I bought the Kindle edition which also made it easy to read.I highly recommend it as a factual, understandable work.

Excellent read, I would recommend it to anyone.

The author is one of the few economists that is able to present, reasoning, figures and graphs that can convince sceptical readers that his conclusions and recommendations are very likely to be correct. It is to a considerable extent based on historical perspectives and comparison with the other fast-growing economies of Japan, South Korea and Japan.It was new to me that Deng Xiaoping not only opened up China for investments of Western countries in coastal areas and gave peasants the freedom to sell the surplus above what they had to deliver to the state in the market at “free” prices, introduced competition and market mechanism in two more ways. What I did not know was how he organized competition between regions and towns that received government funds based on their ability to increase production, output and maintaining social stability. That created a self-reinforcing loop that he predicts to increase output with 10% in GDP for each of the next ten years leading to 70% increase of China’s GDP with close to 70% in 2028.He also "proves" that the many aticles predicting financial collapse do not understand the Chinese reality/The second point was Deng’s organizational capability, politically to outfox Mao’s Marxists doctrines and political Communist party leaders and organizational power that made it possible to transfer two hundred million peasants into industrial related activities in thirty years. Two hundred million that is two third of the total US population, and the same as the combined population of Germany France and the UK.In addition to “opening up”, in 2016/17, 350 thousand Chinese of the one million foreign students are enrolled, many of them in the top US. universitiesOne of the consequences is that China has moved ahead in many of the natural sciences including engineering areas relative to Europe and is catching up with the USA.Where does that leave Europe, even the USA?An excellent and convincing book.

The writer is Chinese American more loyal than most Chinese Communist party hacks . Worth reading as it is party propaganda minus the usual homilies to China being the centre of the universe .

I like-it

Full of details. Different perspective