George Magnus at Prospect Magazine, December 8:
Beware anything that makes a superpower unpredictable
In the years leading up to and especially after the financial crisis, international relations experts would often predict that China was on course to dominate the global system. Since Xi Jinping came to power more than a decade ago, he has propagated just such a narrative. He has articulated China’s pursuit of modernity, power and global status as purposeful and strategic, and embedded that pursuit in what he calls the “Chinese dream of national rejuvenation”. He wants to transform China into a powerful, respected and socialist country and to re-frame the global system of governance and values in China’s interests, to create a China-centric world order by 2049, the centenary of the founding of the People’s Republic.
Yet, here we are, almost 11 years after Xi came to power, and it is not uncommon to hear some of those same people talking about Peak China (even if the term Plateau China may be a better, if less catchy, description for the trajectory of the country’s economic power). A malaise has become a feature of the young, the middle class and of private firms and entrepreneurs. Such low levels of confidence or even pessimism are typical of an economy going through an important transition to slower growth, and in which accumulated problems of over-investment, misallocation of capital and economic imbalances have been allowed to accumulate.
The mood was captured briefly, in October, by the untimely death of former premier Li Keqiang, who was mourned not only in the customary fashion for a departed leader, but also as the symbolic end of an era that began with the promise of extensive liberalising reform and delivered almost nothing. Li, who was associated with reform, was side-lined by his boss Xi Jinping for much of his decade in office. Meanwhile Xi, who is certainly no reformer, became the architect of a more state- and party-centric governance system in which control, stability and repression have prevailed, reflecting China’s faltering development model. This week, Moody’s, the international ratings agency, downgraded its outlook for China’s credit rating from “stable” to “negative”, while maintaining the country’s A1 credit rating for now. The agency expressed concern about the weakening economic outlook and rising debt capacity problems.
Economic growth started to slow well before Xi took charge in 2012
The governance of Xi may have exacerbated China’s economic problems, as did Covid, but neither was the cause. Economic growth started to slow well before Xi took charge in 2012. China’s economic development model began to show weaknesses before the financial crisis which have only been exacerbated since. Think about them as the six Ds. Excessive debt that has now exposed low debt servicing capacity; the demographics of rapid ageing; loss of dynamism, or productivity growth; the return of decree-type governance in which, for example, private firms and entrepreneurs are stigmatised or coerced; distributional issues of who will pay, and how, for the real estate bust and for the public goods and services provided by local government; and decoupling, as China confronts the harshest external environment it has faced—partly self-made—since the Mao era.
In the summer of 2023, as China’s disappointing recovery from Covid was revealed, some excited commentators wrote headlines predicting the country’s imminent economic “collapse”. That proved to be hyperbole. Even so, whatever is going on in the Chinese economy merits close scrutiny. Whether the economy has peaked or is plateauing, the implications are not trivial inside China or for the rest of the world....
....MUCH MORE
If interested see also the post immediately following this one:"China’s Xi goes full Stalin with purge"
