China’s leadership is relying on a surge in exports to revive slumping growth, but the policies will not get the world’s second-largest economy out of trouble, a senior China observer said.
Anne Stevenson-Yang, co-founder of J Capital Research, ” A Wild Ride: A Brief History of China’s Economic Opening and ClosingThe New York Times noted Beijing’s failures in an op-ed on Saturday.
“Years of erratic and irresponsible policies, excessive Communist Party control, and unfulfilled reform promises have led to a dead end in China’s economy, with weak domestic consumer demand and slowing growth,” she wrote. “China’s leaders believe in getting rid of The only solution to the dilemma is to rely on exports.”
Stevenson-Young predicts that as cheap manufactured goods continue to flood the market, the result will be greater tensions with China’s trading partners and that the Chinese people will become more pessimistic, leading the government to become more repressive.
She said the root of China’s economic problems is excessive control by the Communist Party that will not go away, while its strategy of focusing on adding more industrial capacity is counterproductive.
Most economists advise China’s leaders to loosen controls on the private sector and promote more consumption, which will require reforming the government – “which is unacceptable,” she added.
The Tiananmen Square protests of 1989 were an opportunity for the government to liberalize in response to the growing private sector in economic reforms that had begun a decade earlier. But Stevenson-Young pointed out that this would weaken the power of the Communist Party.
“Instead, China’s leaders have chosen to open fire on protesters, further tighten party control and rely on government investment to stimulate the economy,” she said.
In the decades that followed, China’s investment-driven growth sought to placate its people, while its cheap exports drove down prices in the West. Meanwhile, debt continues to pile up across China, and new infrastructure and housing are underutilized.
Now, President Xi Jinping is running out of policy options, Stevenson-Young warned, as Chinese consumers refuse to spend more and China’s trading partners erect more barriers to their exports. In fact, the Biden administration is preparing to impose tough tariffs on a range of Chinese goods. Nor will innovation come to the rescue, as China’s economy still relies largely on copying existing technology, she added.
“All this means that the era of ‘reform and opening up’ that transformed China and fascinated the world since its beginning in the late 1970s has quietly ended,” she concluded. “Mao Zedong once said that in an uncertain world, the Chinese must ‘dig tunnels deep, store food everywhere, and never seek hegemony.'” This siege mentality is back.
Slowing economic growth in China, a housing crisis, high youth unemployment and U.S. restrictions on key technologies have led to predictions of a so-called “lost decade of stagnation.” Senior strategist Ed Yardeni said last year that China could become “the largest nursing home in the world” in response to China’s aging population.
But a senior China expert warned against such pessimism last month, saying it could lead to complacency in the United States.
Nicholas Lardy, senior fellow at the Peterson Institute for International Economics Foreign affairs
