‘China economy’ theme of the month

After the recent flurry of op-eds about China’s failing economy, international commentators focus on Beijing’s own reluctance to do anything short-term or serious about it. Some paywalled…

The Diplomat on why Beijing isn’t trying harder to boost the economy…

…Recent economic indicators are not only acceptable to Beijing, but in fact align with its long-term political interests. If China’s economy were to return to high levels of growth through capitalist mechanisms, the relevance of a nominally “communist” ruling party would increasingly be in doubt.

Rather than fret about China getting stuck in a middle-income trap, China’s political elite likely feels more threatened by the prospect of an ever-larger upper-middle class. Capping individual and corporate wealth creation is a way to extend the dominance of a party that otherwise risks losing its relevance.

…If the government does eventually inject large-scale fiscal or monetary stimulus, it is more likely to be forced by a major economic crisis or spike in social discontent, rather than through a proactive policy pivot.

In other words, they want growth – but the state-controlled sort.

A NYT piece on China’s property market and attempts to boost consumption looks at the weakness of the country’s social safety net – health, unemployment and old age coverage. In a last resort, the jobless may have to stay with rural relatives and grow food (and the government still seems to assume that many kids can and will support retired parents).  Central and local government has been trimming welfare for ideological and fiscal reasons respectively…

China has mostly doubled down on investments to generate growth. The biggest industry by far over the last several years has been building new apartments — not consumer-oriented services like travel or restaurant dining.

Also…

Economic growth in China started to slow before the pandemic and has since slackened further. That has left social spending increasingly in competition with the military budget, which has been expanding 7 percent a year. 

In the WSJ…

Accelerating China’s transition to a more consumer-led economy—such as that of the U.S.—would make growth more sustainable in the long term, economists say. 

But top leader Xi Jinping has deep-rooted philosophical objections to Western-style consumption-driven growth, people familiar with decision-making in Beijing say. Xi sees such growth as wasteful and at odds with his goal of making China a world-leading industrial and technological powerhouse, they say.

…Chinese officials told their counterparts at multinational institutions that the many hardships Xi survived during the Cultural Revolution—when he lived in a cave and dug ditches—helped shape his view that austerity breeds prosperity, the people said.

From news.com.au…

“China’s rulers seem to be building and perfecting their own 21st-century version of the Berlin Wall,” said Council on Foreign Relations senior fellow Ian Johnson.

“Using the tools of the digital age, Xi transformed China’s wall from an ad hoc assembly of rules and regulations into a sleek, powerful apparatus.

“In doing so, however, it may instead be repeating the mistakes of its Eastern bloc predecessors in the middle decades of the Cold War.”

The Economist…

…short-term growth is no longer the priority of the Chinese Communist Party (ccp). The signs are that Mr Xi believes China must prepare for sustained economic and, potentially, military conflict with America. Today, therefore, he emphasises China’s pursuit of national greatness, security and resilience. He is willing to make material sacrifices to achieve those goals, and to the extent he wants growth, it must be “high quality”.

Yet even by Mr Xi’s criteria, the ccp’s decisions are flawed. The collapse of the zero-covid policy undermined Mr Xi’s prestige. The attack on tech firms has scared off entrepreneurs. Should China fall into persistent deflation because the authorities refuse to boost consumption, debts will rise in real value and weigh more heavily on the economy. Above all, unless the ccp continues to raise living standards, it will weaken its grip on power and limit its ability to match America.

…decisions are increasingly governed by an ideology that fuses a left-wing suspicion of rich entrepreneurs with a right-wing reluctance to hand money to the idle poor.

Probably the best read of the lot – a Foreign Affairs article sums up pretty much all of this and more…

…the Chinese Communist Party had stubbornly stuck to its “zero COVID’’ strategy with vast lockdowns of some of China’s biggest cities, even as most other countries had long since ended ineffective hard controls in favor of cutting-edge vaccines. The government’s inflexibility eventually triggered a backlash: in November 2022, antigovernment protests broke out in Chengdu, Guangzhou, Shanghai, and Beijing, an astounding development in Xi’s China. Then, in early December, the government suddenly abandoned zero COVID without vaccinating more of the elderly or stockpiling medicine. Within a few weeks, the virus had run rampant through the population, and although the government has not provided reliable data, many independent experts have concluded that it caused more than one million deaths. Meanwhile, the country had lost much of the dynamic growth that for decades has sustained the party’s hold on power.

…The government has created its own universe of mobile phone apps and software, an impressive feat but one that is aimed at insulating Chinese people from the outside world rather than connecting them to it. Religious groups that once enjoyed relative autonomy—even those favored by the state—must now contend with onerous restrictions. Universities and research centers, including many with global ambitions, are increasingly cut off from their international counterparts. And China’s small but once flourishing communities of independent writers, thinkers, artists, and critics have been driven completely underground, much like their twentieth-century Soviet counterparts.

…Beijing’s bet seems to be that in order to withstand the pressures of an uncertain world, it must turn inward and succeed on its own. In doing so, however, it may instead be repeating the mistakes of its Eastern bloc predecessors in the middle decades of the Cold War.

…state power is exercised through an increasingly complete system of censorship of speech and thought, whether on the Internet or television or in textbooks, movies, exhibitions, or even video games, to create a widely accepted historical narrative that makes the party seem essential for China’s survival. It also now includes the idea that China should build all key technologies on its own, rejecting the principles of comparative advantage that have been the bedrock of globalization. 

A thread…

The west keeps being surprised that Putin and Xi are not following the logic of economic interest and don’t prioritize welfare of their subjects. Many expect them to “come to their senses” and reduce aggression abroad and repression at home, because this is “in their interest”.

Yet the priority of these autocratic rulers is regime security, and they see America as the biggest threat, because of what it represents, liberal democracy. Repression at home and attempts to “make the world safe for autocracy” are two elements of their anti-democracy strategy.

Whatever America and its allies in Europe in Asia do, they will be perceived as existential threat to these regimes, which makes any real partnership impossible.