Friday, November 26, 2004

Cooling Shanghai Fever: Macroeconomic Control and Its Geopolitical Implications

Fall 2004, Issue 12,

Abstract: It is often said that politics is about who gets what, when, and how. Since early 2004, Hu Jintao and Wen Jiabao have adopted a macroeconomic control policy to limit bank lending, land use, and fixed-asset investment. They have acknowledged explicitly that this policy does not treat all sectors and provinces in the same way. While allocating resources to support the agriculture, energy, transportation, and social welfare sectors, especially in the less-developed western and northeastern regions, Hu and Wen have strived to cool off the decade-long construction fever in Shanghai and the Yangtze River Delta. The fact that the central government can say "no" to Jiang Zemin's turf suggests that Hu and Wen have begun to take the offensive. Through macroeconomic adjustments and geopolitical coalition-building, Hu and Wen have consolidated their power. However, given China's daunting challenges, only time will tell whether the Hu-Wen administration can achieve a soft landing politically as well as economically.

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