ABSTRACT
To understand the implications of China's future choices, it is important to understand the current state of the global economy. When the US and Europe went into the Great Recession in 2007 and 2008, they purchased less exports from China. China has identified the solution to that global glut, which is consumption-driven growth. Although consumption-driven growth has worked in other countries and in other times, it has not worked in China. Western economists would argue that China could gain the most if it embraced a global free market by eliminating all capital controls. China's government could continue to focus on macroeconomic performance, as it has under Hu Jintao and Xi Jinping. China's government focusing on freeing up markets will not work in the absence of trust, because market participants will focus on short-run speculative gains to the detriment of China's long-term potential.
