Do you recall that I mentioned “China permabears”, commentators who were reliably anti-Chinese? I singled Gordon Chang out by name. In a piece at 1945 after explaining China’s present economic situation, Mr. Chang provides his prediction for China’s near future:
Most analysts just assume growth will moderately decline in the years ahead. That assessment looks wrong, however. “We would not just be reverting to the sustainable growth rate, but we would also be reversing much of the previously recorded unsustainable growth,†Michael Pettis of Peking University’s Guanghua School of Management predicted in a September 3 tweet.
Pettis, also a senior fellow at the Carnegie Endowment for International Peace, has politely suggested with his tweet that China’s economy will begin an extended period of contraction. Given the country’s massive debt overhang, a slowdown in reality means a crisis.
Last fall’s failure of Evergrande Group, which effectively triggered other defaults in the crucial property sector, is a warning of what will happen country-wide.
Mr. Chang has been predicting a catastrophic collapse for China for more than 20 years. This time he may be right.
I honestly don’t know what will happen. What I think should happen is that China should rely more on consumer spending and less on government spending. In particular it should abandon its insistence on food self-sufficiency.
It has been suggested that the reason China has not adopted that strategy is that it would cause the Chinese Communist Party to lose control over the country. I suspect that rather than becoming more like other economies, the Chinese authorities will increasingly centralize authority in Beijing, as Mr. Pettis suggested in a piece to which I linked last week.
Update
I think this post by Christopher Carothers at The National Interest is relevant, too:
Why has Xi led so many policies that directly harm China’s economy? Analysts have often portrayed Xi’s moves as misguided attempts to avoid larger economic ills. Xi’s crackdowns on the technology and real estate sectors aimed to prevent bubbles and rebalance the economy. Zero-Covid is an attempt to protect the country’s weak healthcare system from going overboard. New rules on the education and gaming industries are investments in the health of China’s future workers.
Yet these explanations miss the big picture. Economically costly policies have all served to enhance the regime’s political and ideological control, both over the economy and over society.
Crackdowns on tech giants are driven less by distaste for monopolies, as in the United States, and more by fears that these companies are “insufficiently committed to promoting the goal advanced by the Chinese Communist Party,†as Harvard researcher Josh Freedman found. Similarly, restrictions on real estate borrowing and cryptocurrencies reflect fears that private market forces are too powerful, and that the state is losing its leading role in the economy and its free hand to dictate policy.
Said another way, the objective is continued control of China by the CCP. Economic growth and prosperity are just means to that end.
China has done much better than I expected, though they had a big assist from the rest of the world, especially the US. But they are governed so poorly I have never seen them as a threat to overtaking the US or even the EU.
Steve
Zero COVID lockdowns aren’t imposed out of compassion. The party cannot allow itself to be seen to fail.
So restrictive residents can only leave their apartments for COVID testing means no visits to sick or dying relatives, food delivered by authorities,
(bet that’s tasty) , any where in the West this would be a recipe for civil unrest.
IMO China is as likely to turn military force inward as outward.
I think Xi is a real Maoist communist, and he is uncomfortable with Deng’s reforms despite their success. Too much of China’s economy is wild west capitalism. The more Xi reverts to Maoism, the worse China’s economy will be, but for now he has a substantial buffer and room for error.
However, despite Xi’s communist ideology, the Chinese economy will never be brought to the verge of an actual Great Depression collapse that the Europe’s Green’s are imposing on the European people. And our own government is infested everywhere by equally lunatic woke/Greens, Dept. of Energy, EPA, Dept of Defense, Dept of Justice (and FBI), Dept of Interior…, so we are in danger of following Europe down the drain.
As to China overtaking the US economically, that happened some time ago. The Chinese total economy is currently at least one-third bigger than the US’, and its manufacturing economy is at least 50% bigger. Its manufacturing sector is also much more comprehensive and modern than ours. China is way ahead of every other country is the actual use of AI/5G to run their factories. They have 70% of all the 5G cells in the world. (See David Goldman at Asia Times.) And they, like Russia are pretty autarkic in manufacturing, although they are heavy importers of energy and some food. Of course, they are sitting next door to the Russian cornucopia, and Russia needs them as a friend.
Currently, 800 million Chinese live European level middle class life styles, which admittedly is substantially below ours. That leaves 600 million Chinese peasants to be brought into the modern world.
China needs a generation of peace to complete the conversion of its entire economy to First World levels. The problem for the American people is that the neocons who control our government are trying to provoke a military crisis over Taiwan, in large part to derail the growing Chinese economy. God help us if they succeed.