Most countries only wish for China's problem: How to slow an economy racing too fast for its own good. Last year the Communist Party did mandate a slowdown, but guess what? The $2 trillion dragon economy is flying even faster.
The world now has a huge stake in Beijing's efforts to rein in growth – and especially to do so gently – before inflation bites or the system's many faults make it falter. A crash landing by the third largest trading nation could send a financial tsunami into global markets, perhaps raising interest rates higher in the US, among other effects.
Beijing's ability to manage China's historic shift to a market economy that began in 1979 is now in doubt. Like the party's failed mandate to slow the economy, its drive against official corruption goes largely unheeded, with graft not only growing but the money amounts getting bigger. And local officials, eager to boost regional economies, are ignoring central commands to stop pressuring banks to lend more.
The numbers are staggering. The amount of loans shot up 70 percent from January to March from a year earlier. That helped push economic growth to a ripping 10.3 percent rate. The money supply is well above a government target. Spending on construction and factory equipment is even more offtarget. Too much money is flowing into real estate, creating property bubbles in big cities such as Shanghai. China's trade surplus is up a quarter from a year ago.
An economy that services one-fifth of humanity may now be too complex for a secretive, centralized party that claims unelected power over much of political life and most big economic enterprises.
Certainly China's trading partners think so. Dependent on foreign markets for its exports, China is being asked to play by global rules and react to global fluctuations. Both the US and Europe are challenging Beijing's trade practices, such as in auto parts, and pressuring it to loosen currency controls. Its banks will soon be fully opened to foreign investors, but that requirement has put strains on big official banks; the government had to write off the banks' massive debts from bad loans – a result of party meddling in how money is invested. Last week, banks were told to hold more money in reserve, as a way to reduce lending.
The party still needs to make a basic decision to relinquish some power and provide more checks in the economy and in governance. Its popularity rests on continued growth, but that growth is in jeopardy if Beijing clings to tight economic controls that increasingly don't work, even as popular discontent grows. The number of public protests has recently been rising about 15-25 percent a year.
Party officials are worried that rural unrest will further rise unless they turn the economy away from rapid, mainly urban growth and toward uplifting the bulk of Chinese who live in the still-poor countryside.
Reports that the party may give some authority to "independent" parties and to the communist-controlled legislatures are welcomed. Perhaps the party may think that giving up some power may be the best way to stay in power. If so, then it should also reduce its economic controls, which just might keep China's fiery economic growth under control.