Maxed-out China needs a strong leader to fix its debt mess, economist Michael Pettis says
President Xi Jinping’s increased power will help put China’s growth plan on the right track, Peking University finance professor says
China needs a strong leader if it’s to clean up its debt mess and rebalance its economy, a long-time watcher of the Chinese economy has said.
Michael Pettis, a professor of finance at Peking University’s Guanghua School of Management, said President Xi Jinping’s consolidation of power at the Communist Party’s national congress last week was necessary to put growth on the right track.
“China does not really need a more liberalised economy, doesn’t need to eliminate capital control. It does not need a larger degree of market role in the decision-making process. What it needs is a significant transfer of wealth, and for that we need to centralise the decision-making process,” he said.
Pettis, who has spent the last decade and a half in Beijing, said the omission of a specific growth target in Xi’s report was “a good sign to start with”, sending a strong message to the country’s local cadres to stop piling up debt.
“The first signal from Beijing that it will rein in credit would be to give up GDP growth target, because the GDP growth target locks the country into surging debt,” Pettis, who also works as a senior fellow at the Carnegie Endowment for International Peace, said a day after China decided the new leadership line-up and enshrined Xi’s thought into the party constitution.