Morning Snip:
State Change

Against the background of a turbulent world economy (one in which, for example, no one takes American leadership for granted anymore), China confronts the need to change the state of its economy, from the outer-directed, export-driven model that works less and less well as its success makes China richer, to something that more closely resembles the consumer-driven Western model. The principle obstacles to change, as suggested in David Barboza’s story, will be the power blocs that control state industries and provincial governments.

But this time, Beijing is not just struggling with inflation, it is also trying to restructure its economy away from dependence on exports and toward domestic consumption in the hopes of creating more balanced and sustainable growth, analysts say.

[snip]

“The state economy and the local governments will be where the future problems occur,” Professor Chen said in an e-mail response to questions on Sunday. “They will be the sources of real troubles for the banks and the financial system.”

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