Economist GMAT Reading Comprehension Challenge #22

Economist GMAT Reading Comprehension Challenge #22

Welcome back to the GMAT reading comprehension challenge! Core reading skills are key to GMAT success so we summarize Economist articles to help you improve your GMAT reading. For more info on getting started with these articles go ahead and visit the GMAT reading comprehension challenge home page.

Article: The struggle to reform China’s economy

Link: https://www.economist.com/leaders/2019/02/21/the-struggle-to-reform-chinas-economy

For the past...

At stake in US/China trade talks is one of the 21st century's most consequential issues: the trajectory of China's $14trn economy.

Although President Donald Trump...

Trump started the trade war with China but there is near universal agreement that China's aggressive state capitalism makes it a bad actor in the global trading system, causing gross distortions in markets at home and abroad, and poses a threat to security.

The backlash...

China's steroidal state capitalism is yielding diminishing returns and leads to long term instability but China's leader, Xi, is reluctant to limit state power or yield to American demands though those things could boost economic performance and win more friends abroad.

Its leaders...

China's leaders are entitled to feel smug as they have presided over one of history's great socio-economic successes.

Yet as our essay...

Since Mr. Xi took power China has in some ways gone backwards as government owned firms have grown in prominence and the private sector has stagnated.

Regulators meddle...

In addition to heavily manipulating the economy and suppressing critical analysis, the government has announced a "made in china 2025" plan to use state direction to dominate high-tech industries, a plan which has so far produced little except for alarm in the rest of the world.

Make no mistake...

The current system could continue for some time but is facing pressure from a shrinking working age population, inefficient spending, and a swelling bubble of debt.

The backlash abroad...

China's image risks becoming another drag on the economy as trade barriers rise and its firms are viewed with suspicion by western markets.

China’s leaders...

China's leaders have underestimated the frustrations behind the trade war and the depth of change in its economy that may be required to end the feud.

To deal with...

To improve the economy and reduce foreign hostility the state's role in allocating capital must be limited and banks and financial markets must operate freely.

Mr Xi also...

Mr. Xi should temper industrial policy by giving state firms autonomy while requiring them to operate as efficiently as the private sector and by shifting spending away from grandiose schemes such as "Made in China 2025" to funding basic research.

Lastly, China...

China must protect the rights of foreign firms.

Given China’s poor...

America needs room to respond to potential Chinese bad behavior with punitive measures but given that Chinese firms can operate with greater transparency and on commercial principles they should treated like businesses from any other country.

Today, these reforms...

Chinese economic policy has been regressing but opening up the economy is a popular idea at home and would make China a richer country with fewer enemies.

Main Idea

Liberalizing the Chinese economy would help solve its current slowdown and create fewer enemies abroad.

Primary Purpose

To provide some context to the current US/China trade war and suggest reforms for improving China's economy and its relationship to the world at large.

 

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