This paper assesses the sources of potential instability of China's political economy by expositing the limits of the post-Mao regime of capital accumulation in historical and comparative perspectives. It argues that the new spatial and socio-political orders under this regime, while propelling China's economic miracle, also contribute to the internalization of the global overaccumulation crisis, which has been haunting the world capitalist system since the late 1960s, into China's national economy. Whereas decentralization of regulatory authority of the state accelerates overinvestment among local economic agents, breakdown of the Maoist social compact and the subsequent class polarization foster underconsumption. The resulting structural imbalance of the economy leads to the risk of falling profit across key sectors and China's over-reliance on the export market, the expansion of which has hinged much on the debt-financed and unsustainable consumption spree in the US. A full-fledged overaccumulation crisis within China in the form of extensive bankruptcy of enterprise, surging unemployment and financial turmoil will certainly trigger extensive global repercussions, given China's weight in the global economy. This crisis, nonetheless, is not inevitable, and can plausibly be averted through a recentralization of the state's economic regulatory functions and income redistribution. No matter whether and how such a crisis unfolds, nonetheless, it is not likely to stop the shift of the center of gravity of global capitalism to Asia in the long run.
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