Economists too often talk about policy changes in abstract, ignoring the drawbacks that even sensible reforms can bring. For years, analysts have been urging China to shift its economy away from heavy industry and toward services and consumption. Yet now that Beijing is taking heed, the costs are piling up.
Most obvious is a deepening gulf between winners and losers. A recent study from Peking University found that China has become one of the most unequal countries in the world. The richest 1 percent of households own a third of total wealth. As the government tries to transition away from coal and steel and toward tech and finance, this divergence is likely to worsen.