China's future still uncertain

China also needs to create an institutional infrastructure that moves it towards a market economy with private property rights. Only then can a rule of law be implemented whereby a competent, independent judiciary can protect contracts and private property rights. Regardless of a recent rebound in export growth, declining inbound foreign investment and its deflationary cycle has pushed China's economy into a corner. Promoting an explosion in the growth of its private sector may be the only way to preserve cohesion of the economy and, by implication, the country.

These structural changes are a long-term project that will tax the formidable talents of Prime Minister Zhu Rongji(朱鎔基) who is widely seen as the prime motivator behind reform. Indeed, the approach outlined above is worthy of being enshrined as Zhu Rongji thought. It is not only in the interest of China that he succeeds in pushing his agenda forward. It is also in the interest of all the trading nations.

Christopher Lingle is Global Strategist for eConoLytics.com.