The Chinese authorities have announced that China’s economy grew during 2020, the only major economy in the world to do so. The editors of the Wall Street Journal consider the announcement:
Some of Beijing’s cheerleaders want you to believe this is mainly because the Chinese government acted so aggressively to suppress the pandemic. That story sits uneasily alongside Beijing’s slow-rolling of early information about Covid-19 when more information sharing might have helped other countries.
Beijing adopted particularly aggressive lockdowns once it did act, sealing off entire cities and even now locking down apartment buildings or neighborhoods at a moment’s notice to suppress outbreaks. To the extent anyone can trust Beijing’s data about virus spread, it appears to have Covid mostly under control.
But a closer look at the economy suggests the growth has come from somewhere other than Beijing’s putative suppression of the pandemic. China’s Communist Party reverted to its old economic-crisis playbook to goose debt and exports while tightening political dominance over the economy.
New credit has exploded, with total public and private debt expected to exceed 270% of GDP in 2020, up 30 points in one year. Most of that has gone to state-owned firms and exporters. Smaller, more productive private companies that serve the domestic market report credit shortages. This undermines long-term growth but suits President Xi Jinping’s goal of consolidating Party control.
One clue that something’s amiss is that retail-sales growth slowed as the fourth quarter progressed, slipping to 4.6% year-on-year in December and now significantly lagging overall GDP growth. Lockdowns explain bad retail sales in the West, but China is supposed to be open for business. Dipping sales suggest, as economist Michael Pettis argues, that much-needed rebalancing toward domestic consumption is stalling or reversing as the global pandemic crisis drags on. The economy was driven through 2020 mainly by fixed-asset investment and that old standby, real estate.
Can China’s economy grow indefinitely by lending itself money and increasing its share of total world production? I’m skeptical. Perpetual motion doesn’t work. If it looks like perpetual motion and it sounds like perpetual motion and it acts like perpetual motion, it is perpetual motion.
“retail-sales growth slowed as the fourth quarter progressed, slipping to 4.6% year-on-year ”
Any particular reason to believe that number? Same source as the rest, right?
Back to blaming China and not WHO? They need to make up their minds. Of course we now know that the US government knew what was going on well ahead of public release by China so maybe we take responsibility for our own management? LOL
Steve
I disagree with the WSJ’s premise.
Compare 2020 to 2009; when the Chinese government really leaned into fixed asset investments and real estate for stimulus. From 2009-2010, China achieved GDP growth of 10+% through credit creation at several times US GDP, an astonishing figure since China had a much smaller economy back then.
Considering GDP growth was 2.3%, the Chinese government stimulated the bare minimum for “social stability”.
Based on anecdotal data, here is an alternate explanation why Chinese consumers were frugal; fear of COVID. While actual COVID cases were negligible and businesses were open, most people carried a great respect for COVID. Despite memes of pool parties and such; the vast majority were cautious about socializing, etc. When consumers are fearful; spending is going to be down.
On a more general note, it will be interesting to compare how countries that were restrained in their economic response to COVID, like China, Russia, Mexico fare in coming years vs countries that had an aggressive economic response like US, Canada, Japan, etc.
PS: “we now know that the US government knew what was going on well ahead of public release by China”
Could this incredible claim be backed up with a credible source (e.g. links, citations)?
There is no reason to doubt Chinese economic numbers. One needs only to look at the (literal) concrete results since Deng set in motion his revolution: the huge modern military (not existent 40 years ago); a very extensive high speed rail network; numerous large cities and new cities (one San Francisco per month, occupied); the move of 400 million people from subsistence farming and poverty to high tech middle income lives and jobs; a highly diversified, modern, extremely large manufacturing sector.
If China’s 4.6% GDP growth looks puny, it should. It’s down by half. The US is in negative growth, 2%, and it is that number that is highly doubtful, down 10 to 15% seems more likely.
China is the economic miracle of the last forty years, out performing every other country by far. On a PPP basis, China’s economy is at least one-third larger than the US economy, and it is growing three times as fast.
Despite of the claims of evil China this and evil China that, it recently signed two massive trade agreements. The RCEP unites some 15 Asian countries into a free trade zone. China was already the largest trading partner for those countries, and now their economies are further enmeshed.
China also signed a mutual investment treaty with the EU, which will give Chinese companies access to European financial sources.
The US is excluded from both deals. American elites mutter about the QUAD (India, Japan, Australia, and the US), but Australia and Japan are in RECEP, as well as New Zealand, South Korea, Viet Nam, Philippines, Malaysia, and Indonesia. If combined with the EU deal, everyone of our allies, except Canada and Norway, has signed a major economic deal with China. And then there is BRI/OBOR, which includes some 130 countries in Eurasia and Africa.
Face facts. We offer other countries the opportunity to engage in shooting wars with Russia and China. China, and its partner Russia, offer countries trade deals and economic growth.
The US has lost the economic war with China; that’s over. And it is winning the fight for hearts and minds. Let’s hope our elite doesn’t lash out in frustration and start a nuclear holocaust.
https://www.npr.org/2020/09/14/912524343/woodward-addresses-criticism-that-he-shouldve-detailed-trump-interviews-earlier
Steve
Even that article has the earliest date as Jan 28 — when Xi had a chat with Trump.
Wuhan was locked down on Jan 23rd with hospitals overwhelmed, in full glare of the international media. Whatever Xi told Trump was obvious if you watched CNN on Jan 25.
The WSJ is talking about the coverup prior to the lockdown; which was the first 2/3 weeks in Jan, when candor could have made a difference.
Please show the reasoning at how this proves the US government knew what was happening in China before “public release”.
Link goes to WHO timeline. Who didnt even arrive in China until Jan 28th. It was 2 days later that they released info saying it was an emergency and this was jointly released with China. But even at that point China had not released everything it knew. It had released the genome. We knew they had some kind of virus, but it still had not been confirmed that it was a respiratory virus with human-human transmission. I can easily find quotes from the Trump admin claiming that China was hiding info into March if you want. It seems abundantly clear that the US knew this was a bigger deal than was made public by anyone, including China, as far back as January. WHO is not a spy agency while we have lots of intelligence people so not surprising we knew before they did.
https://www.who.int/news/item/27-04-2020-who-timeline—covid-19
Steve
You arrived at the opposite conclusion to that timeline that a panel the WHO appointed to review its response concluded.
https://www.usnews.com/news/health-news/articles/2021-01-19/china-world-health-organization-could-have-reacted-better-to-coronavirus-panel-finds
The first sentence, “CHINA AND THE WORLD Health Organization could have responded quicker and more definitively to contain the coronavirus pandemic at its outset, an independent review panel determined.”
I would point out WHO didn’t arrive in China until Jan 28th because the Chinese government purposefully delayed their entry.
One other criticism is you make the unsubstantiated claim that the US government has lots of intelligence people in China that knows what is going on. The opposite is true, during the Obama years, the CIA network in China was destroyed, the CIA has few sources “on the ground” today.
There are a number of countries in which our human intelligence resources are quite limited including China, North Korea, and Iran.