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
Nicholas Lardy’s excellent new book, The State Strikes Back, could hardly arrive at a better moment. Using careful analysis to challenge common hypotheses, Dr. Lardy takes a close look at the principal factors affecting China’s longer-run growth prospects. Ultimately, he is hopeful, but realistic: China could sustain its recent pace of growth for an extended period—or grow even faster—but only if the government is willing to return to its earlier commitment to serious reforms that favor market, rather than state, allocation of resources.
Kermit Schoenholtz, New York University, and Stephen Cecchetti, Brandeis University
In a timely new book, The State Strikes Back: The End of Economic Reform in China?, Nicholas Lardy ... argues that poor policymaking is to blame for much of the slowdown since the financial crisis. It’s a development that has deflated the previous optimism of many China-watchers, including the economist himself. …The most thought-provoking parts of the text…attempt to understand not just what happened, but why it happened – and what it means for prospects for future reform.
Christopher Beddor, Reuters Breakingviews
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
Misconceptions About the Chinese Economy
Interview on NPR's Planet Money
March 4, 2019
Xi's Private Lending Push Risks Being Hamstrung at Local Level
Op-ed by Kevin Hamlin on Bloomberg News
February 24, 2019
Mao Over Markets
Book review by Christopher Beddor on Reuters Breakingviews
February 15, 2019
Beijing Urged to Push Reforms to Avert Crisis
Op-ed by Wendy Wu in the South China Morning Post
February 14, 2019
What in the World: China's Slowing Growth
Commentary by Fareed Zakaria on CNN
February 3, 2019
Op-ed by Ed Crooks in the Financial Times
February 2, 2019
China could slow down without economic policy change, says pro
Interview with Nicholas R. Lardy on CNBC
January 29, 2019
The challenge of one world, two systems
Op-ed by Martin Wolf in the Financial Times
January 29, 2019
A cogent guide to China's economic slowdown and the marginalisation of the private sector
Book review by Gabriel Wildau in the Financial Times
January 28, 2019
Hopes riding high on U.S.-China trade talks, but reality paints a dimmer outlook
Op-ed by Don Lee in the Los Angeles Times
January 28, 2019
China: Mao Strikes Back
Book review by Kermit Schoenholtz (New York University) and Stephen Cecchetti (Brandeis University)
January 28, 2019
Trade Talks Spotlight Role of China's State-Owned Firms
Op-ed by Bob Davis in the Wall Street Journal
January 26, 2019
China's private sector struggles for funding as growth slows
Op-ed by Tom Mitchell, Xinning Liu, and Gabriel Wildau in the Financial Times
January 21, 2019
China's Xi Jinping is no Davos man
Op-ed by Rana Foroohar in the Financial Times
January 20, 2019
Xi Jinping's turn away from the market puts Chinese growth at risk
Op-ed by Nicholas Lardy in the Financial Times
January 15, 2019
China will rebound from today's 'peak pain' but Maoist revival blights the future
Op-ed by Ambrose Evans-Pritchard in the Daily Telegraph
January 14, 2019
Why China clings to state capitalism
Op-ed by Robert J. Samuelson, Washington Post
January 9, 2019