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For its broader reform project to succeed, China needs a new “federalism” -- a realignment of central and local government power -- that can adapt to the conditions of a rapidly changing economy.
In its recent round of reforms, China replaced the word "basic" with "decisive" to describe the role of markets in China's economy. Although this is a substantial breakthrough, it would be a mistake to think that it is conclusive: to make the market decisive, the state must also retreat.
Most observers are gloomy about the prospects for serious economic reform in China. But they ignore a central lesson of recent Chinese history: reform is possible when the right mix of conditions comes together at the right time. And the very circumstances that facilitated the last major burst of economic reform in the 1990s are largely present today.
China will not simply bail out Pakistan with loans, investment, and aid, as those watching the deterioration of U.S.-Pakistani relations seem to expect. Rather, China will pursue profits, security, and geopolitical advantage regardless of Islamabad's preferences.
The future of the U.S.-Indian relationship will depend on whether India chooses to align with the United States and whether it sustains its own economic and social changes -- and on what policies Washington pursues in those areas that bear heavily on Indian interests.