Fan Gang on China’s economic policies

Getting economic recipe right

Fan Gang

China Daily, July 2, 2010

China's active counter cyclical policy interventions in boom times has tamed overheating over the past three decades

China's GDP growth this year may approach 10 percent. While some countries are still dealing with economic crisis or its aftermath, China's challenge is - once again - how to manage a boom.

Thanks to decisive policy moves to pre-empt a housing bubble, the real-estate market has stabilized, and further corrections are expected soon. This is good news for China's economy, but disappointing, perhaps, to those who assumed that the government would allow the bubble to grow bigger and bigger, eventually precipitating a crash.

China has sustained rapid economic growth for 30 years without significant fluctuations or interruption - so far. Excluding the 1989-1990 slowdown, average annual growth over this period was 9.45 percent, with a peak of 14.2 percent in 1994 and 2007, and a nadir of 7.6 percent in 1999.

While most major economies in their early stages of growth suffered crises, China's story seems abnormal (or accidental), and has elicited periodic predictions of an "upcoming crash." All such predictions have proved wrong, but the longer the story lasts, the more people will forecast a bad end.

For me, there is nothing more abnormal about China's unbroken pattern of growth than effective macroeconomic intervention in boom times.

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