Michael Spence discusses the importance of China’s economy and the issues facing it:  Faotors impacting on growth are China’s current territorial disputes with its neighbors, the deteriorating relationship with the US and Xi’s efforts to make the country more transparent and less corrupt.

Spence asserts that because China as such a large presence in global markets, it may be demand-constrained which would take a trio of policies involving high return on investment, higher value of government services and higher level of consumer demand.

Public and private investment can drive China’s growth, but only if the returns are high. China is doing this as it licenses new private banks and a shadow banking system.  Minimum wages have increased household income and the potential for demand.  But there is a question about whether income growth or leverage is driving demand.   Leverage, of course, brings future demand to the present, but does not solve future problems.