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Why supply side reform matters to China

By Li Yiping | China Daily | Updated: 2015-12-22 07:59

Reviewing the process of the change from demand management to supply management in market economies will help us understand China's supply side management.

Western economies are typical free market economies, which suppose supply will automatically create demand, without leading to a crisis of overproduction.

But the Great Depression (1929-33) forced the US government to abandon its traditional non-interventionist policy and implement, albeit partly, John Maynard Keynes' theory, which says governments should intervene in the market through public investment and even deficit-stimulus to help economies recover. But the final outcome of policies based on Keynesianism was stagflation, that is, inflation without real economic development.

Why supply side reform matters to China

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