China's attempt to export its way out of glut threatens world economy

AT THE height of the 2008 financial crisis, as the world peered into an abyss, China earned global gratitude by pumping a record amount of stimulus into its economy. Ironically, continued stimulus has left the Chinese economy with mounting debt and a production glut threatening world trade.

Managing the asymmetry between leading markets and China as the world's largest manufacturer is among the biggest economic challenges of our time.

First and foremost, the challenge is to Chinese leadership. Writing for China Leadership Monitor, seasoned observer Barry Naughton asked whether the leadership had lost its compass. An underlying theme was that President Xi Jinping's focus on party-state building and concentration of power had a damaging effect on management capacity and institutions. The handling of the stock market and currency reform has revealed serious leadership and policy shortcomings, but the management of the real economy over the last several years seems to be proof of nothing less than a system-generated overcapacity crisis.