China’s economic policymakers have to learn to let go if they want to establish credibility
Yasheng Huang says officials have acted with exuberant irrationality in their desire to retain control, revealing a troubling lack of understanding about the realities of market economies



In his book, The Courage to Act, Ben Bernanke wrote about how US Federal Reserve officials debated and deliberated long and hard about particular words and phrases, and even about the usage of different punctuation marks, in their communiqués with the public.

The most worrying sign is that Chinese economic policymaking seems to be completely divorced from the realities of a market economy
The most worrying sign out of China is not that its GDP growth has slowed to 6.9 per cent. The most worrying sign is that Chinese economic policymaking seems to be completely divorced from the realities of a market economy. In a market economy, policymakers need to think about credibility and should only choose to do those things that have a reasonable chance of success. They should also take into account not just their actions but also reactions to their actions.
By these criteria, economic policymakers in China have fallen far short. Many focus on the stock market turmoil last August and earlier this year but, to me, the most troubling illustration is the market bull run that began in the autumn of 2014. By June 2015, the Shanghai Composite Index had more than doubled within a year. The puzzle is not why the stock markets in China have crashed but why they rose so far and so fast in the first place.