stumbled in This old FP article by Gordon Chang And it’s really interesting how similar these 10 year old arguments are to the same arguments being made today.
China has outperformed other countries because it has been in a three-decade ultra-high cycle, mainly for three reasons. First, there were the transformative “reform and opening up” policies of Deng Xiaoping, which were first implemented in the late 1970s. Second, Deng’s era of change coincided with the end of the Cold War, which removed political barriers to international trade. Third, all of this happened while China was benefiting from its “demographic dividend,” an unusually inflated labor force.
The three points are still repeated frequently when it comes to talk of the inevitable collapse of the Chinese economy.
Hu Jintao, the current leader, is presiding over an era marked, in general, by reversing the course of reform. There has been, especially since 2008, a partial re-nationalization of the economy and a marked narrowing of foreign business opportunities. For example, Beijing has blocked foreign takeovers, erected new barriers such as “domestic innovation” rules, and harassed market leaders such as Google. To strengthen the “national hero” state institutions at the expense of others, Hu abandoned the economic model that had made his country successful.
He replaced Hu Jintao with Xi Jinping, and 2008 with 2012, and that sentence could have been written this year – almost word for word. In the past two years, Hu has been “rehabilitated” in the eyes of the West, who is now seen as a reformer and liberal in comparison to Xi. I imagine that if/when the next supreme leader takes the helm in China, Xi will undergo a similar rehabilitation.
China relies on international trade more than almost any other country, so trade friction – or even lower global demand – will hurt it the most. The country, for example, could be the biggest victim of the eurozone crisis.
This described Trump’s entire logic behind starting the trade war, and it was the eurozone crisis that gave China a port in the eastern Mediterranean at Piraeus.
The irony is that China has grown significantly Less dependent on exports as a percentage of GDP – Moving from a high of 36% in 2006 to just 18.5% in 2020. Among the other large economies of the world, this is only slightly higher than Japan (17.6), India (18.1) and the United States (11.7).
In contrast, Germany stands at 43.8, France at 28.0, and the United Kingdom at 27.4.
China’s workforce will stabilize around 2013, possibly 2014, according to Chinese and foreign demographic experts, but the effect is already starting with rising wages, a trend that will eventually make the country’s factories uncompetitive. Oddly enough, China is running out of people to move to cities, work in factories and boost its economy.
This expectation has not passed after 10 years.
At the same time that the Chinese economy no longer benefits from these three favorable conditions, it must recover from the turmoil – asset bubbles and inflation – caused by excessive preparation of Beijing’s pumps in 2008 and 2009.
This is the same argument that is used nowadays to predict the imminent collapse of Chinese banks.
At a time when critical challenges are mounting, the Communist Party begins a multi-year political transition, and is thus unprepared for the problems it faces. There are already clear divisions among party elites, and the leadership’s sluggish response in recent months – in marked contrast to its erroneously quick reaction in 2008 to economic problems abroad – suggests that Beijing’s decision-making process is deteriorating.
Societal controls have arguably become stronger in the past 10 years, not weaker, as Zhang predicted. Xi’s ruthless purge of opposition elements within the Party, and Destroy unofficial CIA networks Within China it greatly increased the stability of the country, at least outwardly.
It’s always interesting to look at these predictions with the benefit of hindsight. What really stands out is how wrong Expectations were. True, some other rosy predictions did not come true – for example, the International Monetary Fund predicted that China’s economy would exceed the size of the US economy by 2016, and this did not happen. But it is still disturbing that the same arguments are used today as they were 10 years ago, when the economic reality of the past 10 years has more or less proven otherwise.