From Neue Zürcher Zeitung's TheMarket.ch, May 1:
In her new book «Wild Ride», China expert Anne Stevenson-Yang argues that China’s experiment with capitalism has failed. In this in-depth interview, she explains why Beijing is now closing the Chinese economy again – and what the consequences are for the financial markets.
China is keeping the financial markets on edge. After many years of phenomenal growth, the collapse of the real estate market and the economic slump are now dampening investor sentiment.
In addition, there are growing tensions with the West. At the center of the geopolitical conflict is the tech sector. IT companies such as Apple are diversifying their supply chains in order to reduce their dependence on China as a production base. Meanwhile, US export restrictions for leading companies in the semiconductor industry such as Nvidia and ASML are becoming increasingly stringent. With the forced sale of the social media app TikTok, Washington is now also taking action against Chinese internet companies with a presence in the US.
So what’s next for China? The new book «Wild Ride: A short history of the opening and closing of the Chinese economy» by Anne Stevenson-Yang provides helpful clues. Few observers know the subject as well as the American, who has lived in the People’s Republic for more than 25 years.
In this in-depth interview with The Market NZZ, which has been lightly edited, Anne Stevenson-Yang explains how she personally experienced China’s rise from a backward agrarian state to a global economic power, why the unprecedented boom of China’s economy ended in today’s crisis and why she believes the Middle Kingdom’s future will be even more isolationist.
In your new book, «Wild Ride», you make the case that China’s experiment with capitalism has failed. What went wrong?
It was always going to happen. For decades, people have been both enthusiastic about China’s growth and anxious about its competition. It always made me roll my eyes, having lived through the 1980s when Japan was viewed in a similar light. Back then, everyone was worried about Japan’s rapid rise, fearing that it would soon surpass the US as the world’s largest economy. Japanese investors were buying up iconic American assets like movie studios and the Rockefeller Center in New York. However, Japan’s investment-driven economy eventually collapsed, and I believe China’s situation is similar, but on steroids.
China’s rise to global economic power is one of the most important developments in recent decades. Was there ever a chance that a market economy system could have been successful?
I think that’s based on a misunderstanding. Many people felt that way because during the 1980s and into the 1990s, China underwent rapid liberalization. Life was becoming much freer, with abundant job opportunities, rising incomes, and an explosion of goods and products in the markets. In contrast, when I first arrived in the early 1980s, China was a very sepia colored communist society where people addressed each other as ‹comrade›. The fashion was drab, with only blue, white, or gray clothing available, and food options were severely limited.
And then?
By the end of the 1980s, it was just an exploding cornucopia of different things to buy. It was exhilarating to experience the arts flourishing, with rock music and classical concerts, expressionist paintings, and exhibitions that were a little bit risqué. We even had an improv theater in Beijing. But to mistake that for progress toward a Jeffersonian democracy was obviously wrong. China is a society that’s modeled on Leninist Russia, not the 18th century US. In reality, the economic opening from 1980 to present has been a strategic effort to harness capital, all in the knowledge that the doors would eventually close again – which is precisely what’s happening now.
What was the broader impetus for opening up China’s economy and attracting international capital?
In the early 1980s, when Deng Xiaoping sort of walked out of prison and into Zhongnanhai, China’s leadership sought to consolidate power and gain public support after the impoverished and highly controlled Maoist era. To achieve this, they focused on domestic growth and relaxed controls. As I remember quite vividly, one notable change was allowing farmers to grow and sell their own crops, as long as they met quotas. This freedom brought prosperity and improved livelihoods, enabling farmers to grow crops suited to their local conditions, like coffee on acidic land in hilly areas. Imagine the wealth that was generated thanks to these changes, and how much happier people were.
What was the turning point when the capitalist experiment started to fail?
There were two pivotal moments, and they both revolved around the Communist Party, maintaining control even as the economy and society became more complex and diverse. The first one, of course, was the 1989 Tiananmen Square protests and massacre. During the 1980s, China experienced a surge in new companies and businesses, leading to rapid growth and complexity. The bureaucracy struggled to keep pace, resulting in a relaxation of regulations by necessity. As a result, individuals and groups began to assert their newfound autonomy and exercise their rights in unprecedented ways.
And that became a problem for the communist regime?
Yes, as people began to demand a greater share of the economy, protests erupted into large-scale public demonstrations. The Communist Party, perceiving this as a threat, responded with force, violently suppressing the protests by shooting people and running them over in the streets with tanks. In the aftermath, the central government reorganized the bureaucracy and economy to consolidate its power, ensuring greater central control over key aspects such as personnel appointments and local governance. This marked a significant shift towards a more authoritarian approach, aimed at preventing similar challenges to their authority in the future.What was the second turning point?
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