John C. Williams — China, Rates, and the Outlook: May the (Economic) Force Be with You

It’s important to see the situation not through the filters of our own paradigms, but from the perspective of China’s unique position. China is not the U.S. Or the U.K. Or Japan. Its goals, structure, government, and place on its growth trajectory are very different, and looking to impose foreign expectations on China’s markets or actions can lead one astray. 

Growth versus reform

In a nutshell, China is facing a tradeoff between its short-term growth goals and its longer-term reform agenda.…

Of course, that very disposition for intervention is the source of much hue and cry on this side of the globe. China has made important incremental steps on the road to liberalization, and from the perspective of a fully open, free-market, Western-oriented paradigm or advocacy, the recent stock market interventions seem anathema to that goal. But that’s a view through a narrow lens that may obscure the bigger picture.

For all its moves towards liberalization, China’s markets are not the same as ours. Yes, they have a reform agenda, but it’s a mistake to think that in the foreseeable future China will have fully open capital and financial markets in the way that we in the U.S. and other countries think about them. 

FRBSF
China, Rates, and the Outlook: May the (Economic) Force Be with You
John C. Williams | President and CEO, Federal Reserve Bank of San Francisco

ht Mark Thoma at Economists View