A resurgent China should do the hard work now

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The writer is a professor at the University of Cornell, an older colleague in Brookings and author “The Future of Money‘

For all manifestations, the Chinese economy, which was struggling for most of the past year. This is good news for the Chinese government and the global economy. But Beijing was again late in reforming its deep economic problems. This, also, has consequences for China and the world.

Last fall, the Chinese government published the stimulus of fiscal and monetary policy to support growth. Trump’s tariff seems to be to knock on the economy. But significantly, in the first half of 2025, China may get rid of together 5 percent growthThe government set as its goal. For anything that deserves data, industrial production, wide credit measures and total investment are all reasonably well. Better of that, Retail salesA representative of home consumption, has elevated the pace.

Accordingly, the mood in China has shifted significantly. Firstly , The appearance of the Chinese company Deepseek In January 2025, a group of national pride was born. second, President Xi Jinping meeting in February 2025 with senior entrepreneursIncluding Jack MA from Alibaba, send a sign that private institutions of high nature have returned to Saleh. Third, The United States and China trade talks in Geneva This ended by temporarily stopping the customs tariff despite the lack of useful concessions from China, and indicated that Beijing had strong cards to play and will not bend the knee to Trump.

The improvement in feelings has resulted in a modification of the country’s stock market and outdoor capital flows. The government can use this moment to mobilize the Chinese people about a plan to introduce reforms that will raise the chances of reaching growth goals and individual income goals in addition to increasing self -reliance and rebalancing growth. But he showed little attention to doing this.

Calm on the surface lies the fact that the economy is still fragile. Increase the growth of family consumption from Buy incentives It may not last, especially with high unemployment. Display pressure The risks become firm, which reflects the imbalance between production and consumption demand. Private business investment is still weak Because of the uncertainty about the customs tariff and suspicion about changing the heart of Beijing towards the private sector.

China cannot rely on foreign markets to compensate for local weakness. Exports expanded strongly In recent months. However, the United States is no longer a welcoming market and the rest of the world, which is mired in low growth, unwilling to continue the Chinese exports enthusiastically.

The Chinese economy still has deep structural problems. Housing marketFor a long time, the basic pillar of the economy has been deteriorating. Local governmentsIndeed, very debtor and under financial tension, it now has an additional burden of repairing the problems of the housing sector. The liberalization and reforms of the financial market, which are still necessary to direct the massive local savings into fruitful investments, have not advanced recently.

The government seems to save space for the total economic political maneuver to confront any harmful local or external developments later this year. This approach has an advantage.

However, the financial chamber that must now have to address the long -term structural issues with short -term growth in the same time. The money spent on strengthening the social safety network, reorganizing the financial relations of the medium, and reducing the burden of the tax on families and companies would enhance the demand for the short term and help in the long -term economic balance as well. And increasing confidence from the market liberalization would raise investment, employment and family income. High consumption reduces the increasing dependence of the economy on exports.

The lengthy directives of the real estate sector highlight the costs of the government’s approach to delaying reforms and not directly addressing problems. The costs not only multiply, but every problem affects other parts of the economy. For example, the decrease in real estate -related home wealth may limit the growth of consumption and many banks that loaned money to real estate developers in trouble.

The Chinese government should not subside due to what appears on the surface to be a strong economy that has once again succeeded in risky water. It is tempting to postpone the hard work of the wider reforms and liberation when the economy appears stable. But the consequences can be a much greater struggle on the way to make these changes in less favorable conditions.