Taking Stock of China's Transition by Michael Pettis

Special points to highlight in this issue:
 

While policymakers almost certainly understand that the interest rate cuts announced by the PBoC two weeks ago will slow the pace of rebalancing, the asymmetry of the change in rates was designed to minimize the adverse impact on rebalancing, and indicate just how complex China's adjustment is likely to be.

Next year will be a very important year for China because possible strains in the banking system and the intensity with which the reformers present their case will give us a better sense both of how much debt capacity the country retains and of how well positioned Xi Jinping and his allies are to implement the needed reforms.

The completion of [prior] reforms [under Deng Xiaoping] left China ready for an investment-driven growth model that delivered astonishing increases in wealth. It also delivered unprecedented imbalances. China's leaders under Xi Jinping will once again have to liberalize the economy and dramatically change the institutional structure of power in spite, once again, of elite opposition.