The second-largest economy in the world has weakened in the past few years, due to high debt, an aging workforce, slower internal demand, and an ongoing crisis in the real estate sector—the force that had driven much of its explosive growth in the last few decades. These factors were compounded by the COVID-19 pandemic, with the country imposing drastic measures including its zero-COVID policy which lasted until December 2022.
I don’t think economists have some kind of expectation that China should grow forever, merely measuring the temperature of the bath and saying “it’s cooling”.
In a democracy that often leads to a change of government, not always successfully, but definitely consistently. In China the deal the state has with its people is “don’t get involved at our level, and we’ll make sure your wealth is growing. Your kids will go to better schools, get paid better than you were, and you’ll be able to buy a second X”.
What happens to China when that deal breaks? Chinese people have very high saving rates and a lot of it sits in inflated property. If half your savings disappear and your kids prospects get worse, do you put up with what you’re given?
I don’t have answers to these questions but I’m pretty sure China will need some way of managing it. External enemies? Brutal clampdowns? Taking over control of companies and running them poorly? There’s a lot of risk.
I think your assessment is right on. It’s just that this all sounds like an obvious Ponzi scheme. If success is based on endless unsustainable spending and growth, eventually the bubble pops. Plan better.
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I don’t think economists have some kind of expectation that China should grow forever, merely measuring the temperature of the bath and saying “it’s cooling”.
In a democracy that often leads to a change of government, not always successfully, but definitely consistently. In China the deal the state has with its people is “don’t get involved at our level, and we’ll make sure your wealth is growing. Your kids will go to better schools, get paid better than you were, and you’ll be able to buy a second X”.
What happens to China when that deal breaks? Chinese people have very high saving rates and a lot of it sits in inflated property. If half your savings disappear and your kids prospects get worse, do you put up with what you’re given?
I don’t have answers to these questions but I’m pretty sure China will need some way of managing it. External enemies? Brutal clampdowns? Taking over control of companies and running them poorly? There’s a lot of risk.
I think your assessment is right on. It’s just that this all sounds like an obvious Ponzi scheme. If success is based on endless unsustainable spending and growth, eventually the bubble pops. Plan better.