Living Smart

IV PUBLIC POLICY & SOCIAL SCIENCE 140 resources will then be shifted to services – a sector that is undeveloped in today’ s Chinese economy. In a study conducted in the past two years by my team, we showed that policies that remove the subsidy on the SOE sector and alleviate the credit constraints on private firms in China will speed the economic transition up and reduce the trade imbalances by 39.3 percent, which will increase welfare by 14.7 percent, because resources are allocated more efficiently. That is simply too much of a good thing to be ignored for so long. It is obvious that a shift of focus to services will not cure all the ills of the Chinese economy right away, but policymakers ought to take the necessary steps to fix the country’ s economy as soon as possible. Published on August 14, 2019