China's extraordinarily rapid economic growth since 1978, driven by market-oriented reforms, has set world records and continued unabated, despite predictions of an inevitable slowdown. In The State Strikes Back: The End of Economic Reform in China?, renowned China scholar Nicholas R. Lardy argues that China's future growth prospects could be equally bright but are shadowed by the specter of resurgent state dominance, which has begun to diminish the vital role of the market and private firms in China's economy.
Lardy's book arrives in timely fashion as a sequel to his pathbreaking Markets over Mao: The Rise of Private Business in China, published by PIIE in 2014. This book mobilizes new data to trace how President Xi Jinping has consistently championed state-owned or controlled enterprises, encouraging local political leaders and financial institutions to prop up ailing, underperforming companies that are a drag on China's potential. As with his previous book, Lardy's perspective departs from conventional wisdom, especially in its contention that China could achieve a high growth rate for the next two decades—if it reverses course and returns to the path of market-oriented reforms.
Nicholas Lardy, a preeminent expert on China’s economy, argues that China faces a choice: follow the path of market-based reform or retrench to greater state direction. Mindful of the politics surrounding the choice, he makes the case for well-crafted reform, saying it could spur growth greater than most China analysts believe likely. The State Strikes Back is a must-read for policymakers, businesspeople, and investors with an interest in China’s economic future.
—Robert Rubin, former US Treasury secretary
The State Strikes Back makes a compelling, deeply researched, and lucidly written case that the state is resurgent in China as market-oriented reforms stall. Nicholas Lardy, a preeminent expert on the Chinese economy, provides a balanced and insightful overview that, like his previous works, will become standard reference material for anyone interested in understanding the intricacies of the Chinese economy and policymaking process.
—Eswar S. Prasad, Cornell University and author of "Gaining Currency: The Rise of the Renminbi"
Nicholas Lardy’s book reflects the meticulous research and methodical analysis that has established his reputation as a leading observer of China. ... Lardy is more astute than other analysts in understanding why [Chinese economic] reform has stalled. ... [He] argues convincingly that the widening productivity gap between state-owned enterprises and private groups, combined with the growing role of SOEs in total investment, seriously hinders growth.
—Gabriel Wildau, Financial Times
The data underlying this analysis are available here [zip].
1 Understanding China’s Economic Slowdown after the Global Financial Crisis
2 China’s Convergence Potential
3 China’s Failing Strategy to Reform State-Owned Enterprises
4 The Path Back to Market-Oriented Economic Reform
5 Prospects for Further Economic Reform