Given deep structural weaknesses in its enterprise and banking systems, China's economy can no longer sustain robust rates of growth and continue to integrate with the international economy until it has substantially restructured these systems.
Analysts focus on many weaknesses within the Chinese economy.
Clearly, many if not all of these need to be addressed as part of a comprehensive institutional reform. In this paper, we argue that it is possible to understand the variety of structural problems in China's economy from a single perspective - that is, China has not yet established the institutional conditions that are required to ensure the effective monitoring of its productive assets. A well-established remedy for externalities is the application of the logic of the Coase Theorem. The paper then further examines three issues. First, we draw the connection between enterprise reform and banking reform.