The State Strikes Back: The End of Economic Reform in China?

Nicholas Lardy from Peterson Institute for International Economics in conversation with David Loevinger from TCW

Discussion: In his new book, The State Strikes Back: The End of Economic Reform in China?, Nicholas Lardy concludes that China’s economic slowdown is largely the result of a return to state control of the economy and the burgeoning misallocation of resources by China’s financial sector. Defying conventional economic wisdom that such a slowdown is inevitable, Lardy analyzes new data to argue that China’s future growth prospects could be as bright as its extraordinary ride of the past 30 years. However, China’s leadership has consistently championed state-owned enterprises, and encouraged local political leaders and financial institutions to prop up ailing, underperforming companies. This top-down pressure constitutes a major drag on China’s economic potential while at the same time squeezing out private enterprises. According to Lardy, if China’s leadership continues to pursue greater economic and political control, China’s growth would slow further. Alternatively, a return to market-oriented reforms could help the nation achieve higher growth for the next two decades.

About the Speakers:

Nicholas R. Lardy is the Anthony M. Solomon Senior Fellow at the Peterson Institute for International Economics. He joined the Institute in March 2003 from the Brookings Institution, where he was a senior fellow from 1995 until 2003. Before Brookings, he served at the University of Washington, where he was the director of the Henry M. Jackson School of International Studies from 1991 to 1995. From 1997 through the spring of 2000, he was also the Frederick Frank Adjunct Professor of International Trade and Finance at the Yale University School of Management. He is an expert on the Chinese economy. Lardy’s most recent books are The State Strikes Back: The End of Economic Reform in China? (2019), Markets over Mao: The Rise of Private Business in China (2014), Sustaining China’s Economic Growth after the Global Financial Crisis (2012), The Future of China’s Exchange Rate Policy (2009), and China’s Rise: Challenges and Opportunities (2008). He received his BA from the University of Wisconsin in 1968 and his PhD from the University of Michigan in 1975, both in economics.

David Loevinger is a Managing Director in the Emerging Markets Group of Trust Company of the West. Prior to joining TCW in 2012, he was the U.S. Department of Treasury’s Senior Coordinator for China Affairs. While at Treasury, he also served as Minister Counselor for financial affairs at the U.S. Embassy in Beijing and Deputy Assistant Secretary for Asia. Mr. Loevinger was previously an economist for the International Monetary Fund. He started his career in the Office of the U.S. Trade Representative, the Senate Banking Committee, and the U.S. Commerce Department. He earned a Master’s in Public Policy from Harvard University’s Kennedy School of Government and a BA in Government and Economics from Dartmouth College.