China’s economy heading towards ‘dead end’ and Beijing won’t do anything to stop it, academic says
China’s leaders are counting on rising exports to revive flagging growth, but those policies will not pull the world’s second-largest economy out of its dire straits, a leading China watcher said.
Anne Stevenson-Yang, co-founder of J Capital Research and author of Wild Ride: A Brief History of the Opening and Closing of China’s Economyhighlighted Beijing’s failures in an article published Saturday in the New York Times.
“Years of erratic and irresponsible policies, excessive Communist Party control and broken reform promises have created a stalemated Chinese economy characterized by weak domestic consumer demand and slowing growth,” he said. -she writes. “The only way for Chinese leaders to dig themselves out of this hole is to resort to exports.”
This will result in more tensions with China’s trading partners as cheap manufactured goods continue to flood the markets, while the Chinese people become darker, leading the government to become more repressive, predicted Stevenson-Yang.
The root cause of China’s economic problems is the Communist Party’s overcontrol, which is not going away, while its strategies focused on increasing industrial capacity are counterproductive, she said.
Most economists have recommended that Chinese leaders loosen their grip on the private sector and promote more consumption, which would involve government reform – “and that is unacceptable,” she added.
The Tiananmen Square protests of 1989 represented an opportunity to liberalize the government in response to private sector growth resulting from economic reforms begun a decade earlier. But that would have weakened the power of the Communist Party, Stevenson-Yang pointed out.
“Instead, China’s leaders have chosen to shoot protesters, further strengthen party control, and cling to government investments to fuel the economy,” she said.
In the decades that followed, China’s investment-led growth sought to appease the population, while its cheap exports kept prices lower in the West. Meanwhile, debt accumulated across China and new infrastructure and housing remained underutilized.
Today, President Xi Jinping is running out of policy options, Stevenson-Yang warned, as Chinese consumers refuse to increase spending and China’s trading partners erect more barriers to its exports. In fact, the Biden administration is poised to impose tough tariffs on a range of Chinese goods. Innovation won’t come to the rescue either, as China’s economy still relies mainly on replicating existing technologies, she added.
“All this means that the era of ‘reform and opening up,’ which transformed China and captivated the world since its beginning in the late 1970s, ended with a whimper,” she said. concluded. “Mao Zedong once said that in an uncertain world, the Chinese should “dig deep tunnels, store grain everywhere, and never seek hegemony.” This kind of siege mentality is coming back. »
Slowing Chinese growth, the housing crisis, high youth unemployment and US restrictions on key technologies have led to predictions of a decade of so-called lost stagnation. Highlighting China’s aging population, veteran strategist Ed Yardeni said last year that the country could become “the world’s largest retirement home.”
But a leading China expert warned last month against such pessimism, saying it could lead the United States to become complacent.
“Even though its growth has slowed in recent years, China will likely grow twice as fast as the United States in the years to come,” Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, wrote in Foreign Affairs
This story was originally featured on Fortune.com
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