Does Xi Still Know What He’s Doing?

Sad pictures of unfinished residential buildings. Cranes. Stock photos of the PBoC. Statistics on local government debt. Tallies of domestic bank exposure to real estate.

If you search for articles on China’s plans to resuscitate the country’s moribund economy, you’ll find different versions of the same story written over and over again by the same handful of financial media outlets, all paraphrasing each other’s attempts to document nebulous assurances from Beijing as communicated through state-run media and various Party mouthpieces.

Some portals didn’t even bother with this week’s round of meaningless pledges from Chinese authorities, who are pushing banks to renegotiate terms on property loans in a bid to, among other things, facilitate the delivery of unfinished homes. The PBoC and China’s financial regulator broadened the scope of a program that provides for loan repayment extensions. The original policies were included in a 16-point plan for the property sector unveiled late last year alongside 20 “parameters” for easing COVID controls (we saw how well that went).

Together, the measures are designed to “guarantee the delivery of buildings, enhance risk management cooperation with distressed real estate companies and increase financial support” for home purchases. They “achieved good policy effects,” the PBoC said this week, in the course of “extending the applicable period” for repayment extensions such that loans due by the end of next year are now covered. As at least a few analysts were quick to point out, that suggests Chinese officials doubt the situation will stabilize for developers anytime soon.

Fast forward 24 hours and China Securities Journal alluded to additional measures, as well as new policies aimed at bolstering confidence among various sorts of businesses, from the private sector to SOEs to foreign firms. As usual, there were no real specifics to speak of, or at least none that Google was able to translate into anything that sounded specific. There were ideas and trial balloons masquerading as specifics, but nothing markets could latch onto.

Of course, China Securities Journal is state-run media, just like all media. It’s a silly charade: Most “stories” are recitations of official bulletins, notices and other pronouncements, followed by quotes from economists and analysts, some have names others don’t. You can chuckle yourself to delirious tears reading state media. “Experts believe that the extension of the applicable period of relevant policies will ease the financial pressure on real estate development companies,” CSJ said Tuesday, of the updated property measures. “More supporting policies are expected to be introduced later.”

Another piece, published in Shanghai Securities News, started with a laborious (and mostly verbatim) recap of the PBoC’s expanded repayment extension notice, before offering a dizzying array of opinions on what officials should, could or might do next, including, but not limited to, a “moderate relaxation of restrictions on purchases and loans” in localities, tax exemptions on real estate transactions, lower mortgage rates, the “acceleration of product and service innovation” at commercial banks, more liquidity for “high-quality” developers, “special support” for guaranteed-delivery housing projects and initiatives aimed at creating new ways to “meet the housing consumption needs of the elderly.”

Again, those aren’t really specifics. They’re ideas and trial balloons masquerading as specifics. Some may be implemented in one form or another. Some won’t.

This is mission impossible. Capitalism has its flaws, and as regular readers know all too well, I think it (capitalism) is the proximate cause of societal dissolution in the US. But you can’t centrally plan a modern economy that needs to provide for 1.4 billion people. Efforts in that regard won’t just be inefficient, they’ll be wholly ineffectual and policy paralysis will set in eventually as officials grapple with the sheer scope of the task they’ve foisted upon themselves. That’s where China is.

Don’t let this be lost on you: Just seven people (the Standing Committee) make all the decisions. And it’s a total black box. Authoritarianism doesn’t have many virtues, but it does typically allow for decisiveness in policymaking. Nobody needs to be consulted. Consensus is irrelevant. But in China in 2023, the enormity of the task might be slowly overwhelming Xi’s megalomania.

I used to believe the standard line about the shrewdness of Chinese policymakers — that if Western observers can’t discern the contours of a strategy (economic or otherwise), it’s either because the Party is adept at playing things close the vest, or because Westerners are too myopic to spot long-term plans. I’m starting to doubt that narrative now. Increasingly, I think China’s apparent aversion to decisive, big-ticket stimulus suggests the Party simply doesn’t know what to do next.