Reforms aimed at increasing an economy's flexibility are always hard - and even more so at a time of weak growth - because they require eliminating protections for vested interests in the short term for the sake of greater long-term prosperity.

China's economic transformation began with the introduction in the 1980s of market incentives in the agricultural sector. These reforms were followed by a gradual opening to the global economy, a process that accelerated in the early 1990s.

Properly targeted public investment can do much to boost economic performance, generating aggregate demand quickly, fueling productivity growth by improving human capital, encouraging technological innovation, and spurring private-sector investment by increasing returns.

Michael Spence Quotes