This week seems to be China week. Everyone seems to be asking the same question: why is China so successful? ( see here and here and here.

Now maybe this is just an excuse for a bit of self-publicity, since I have just spent a day ‘sprucing-up’ the China page on my website, but lets see if I can take a shot at the question myself.

Firstly, let it be said, Brad Setser seems to be asking many of the right questions. To recap the issues as far as Brad is concerned would be:

1) State intervention in the economy (or certain forms of state intervention at certain stages in the development process) is less of an impediment that is often argued.
2) China’s markets are far more flexible than they seem.
3) High savings rates and high investment rates can overcome a multitude of other sins.
4) High savings, high investment rates and undervalued exchange rate can overcome other sins.

Andy Xie, in the other corner, argues that China?s meteoric economic rise is due to:

(1) its low base;
(2) its size; and
(3) its development model.

As Xie suggests the combination of the still-low base and the large size mean that China?s role in the global economy should continue to rise rapidly.

On the development model he argues that ‘openness Is China?s key asset’.