China's inflation-free route from crisis

For China, the only viable strategy is to shift these bankrupt export factories in the coastal regions toward the domestic market. But the domestic market at present is too weak in consumer demand due to low wages to absorb the overcapacity in export. Thus no funds are available in private credit and capital markets to finance urgently needed restructuring of the export sector on a national scale. Market forces are simply not up to the task.

To kick-start a new economic strategy of shifting the Chinese economy from export dependency to domestic construction, the Chinese government needs to establish a Commission to Restructure the Chinese Economy (CRCE) as a special agency in the State Council under the direct control of the office of the premier, with emergency powers to deal with the unemployment fallout from the sudden collapse of the export sector that will soon threaten social stability.

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The CRCE would be responsible for launching immediately a massive work-creation program to achieve in-place national full employment with minimal relocation of population. This program can be financed outside of the government's fiscal budget by a pre-financing regime through the use of work-creation certificates, a form of special-purpose money specially designed to facilitate job-creation in the socialist market economy.