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 stat
Spot on. Xi is past his sell by date. The Chinese return to a great leader has failed. They are going to need a change of course to spread out decision making and listen to specialists rather than commissars from the party. If not, then china will continue to struggle.
central planning is destined for failure where ever it is tried. So it is no surprise that it is failing miserably in china. China success is due only to what the west gave them or they stole. The Beijing bumblers only took a little longer than the Soviets to destroy their country, The demographic die has already been cast. If they are lucky they can end up like Japan or S Korea which isn’t a bad outcome for China. The CCP crackdown on their most innovative sectors and people is making that outcome unlikely. It doesn’t help that they keep going back to old playbook of infrastructure spending for stimulus. They have already built almost of the projects that make economic sense but continue to build empty cities and roads, bridges and expensive high speed trains to no where.
When I was in grade school in the early 1960s. Some of you may remember that this was when Japan was widely ridiculed in the USA for being a nation of copycats. “Made in Japan” meant poor quality.
A friend’s dad worked as an engineer, perhaps at GE? Anyway, I vividly recall a story he told my friend and I “So, those Japs got a lightbulb from the US that had a manufacturing defect that left a small glass bead inside the bulb. You know what they did?? They made 10 million of them with a glass bead inside!”
We all laughed at those stupid copycat Japanese. How did that turn out?
Many Americans risk making the same mistake when it comes to China. A glance at the annual patent filings hardly suggests that they can only copy western technology. Nor do they lag in the EV, EV battery, solar cell space. US venture capital people we’ve heard from also point to some pretty interesting biotech research. Is this a repeat of “the glass bead” story in the making?
Don’t underestimate your enemies…
Xi has said many wise things about needed economic changes, and surely has some good advisors among the syncophants.
I think the problems include
– Xi wants a centrally controlled economy Mao-style
– modern China is too large/complex for central control
– some of the main necessary changes are antithetical to central control (e.g. business shift from SOEs to private companies, wealth shift from Party elites to masses, more initiative and creativity) and
– Xi wants political control even more than he wants economic change
On why not more stimulus, I suspect that is a different issue. Xi may have decreed that China needs to deleverage, and is unmoved by the lamentations of investors, workers, and non-SOE businesses.
All that said, Xi seems to be making some decisions that are hard to understand. For example, the more he flexes military muscles over Taiwan, the tighter he strangles China’s semiconductor industry, which is surely apparent to him. Maybe he is very optimistic about China’s domestic semi/semicap development.
Historically, most dictatorships turn out to be very incompetent at many things… And being a sadist doesn’t make you competent….