Yep, that’s what I was thinking.
I think what will be true is COVID will be less of an issue near-term in China as compared to other nations. Letting Omicron run rampant through such a large, dense population surely has imparted high levels of somewhat homogenous immunity. I would expect their population to be impervious against the next several Omicron iterations. But, like all coronaviruses, it will be back again.
It’s been seven months since the last post in this thread. Since then we’ve discovered that China didn’t have a big post-covid economic boom. In fact, it appears that the “borrow money to build stuff” economy has serious problems when things slow down.
I want to believe that the fundamental problem is that authoritarian governments are just incompatible with modern economies. Eventually, the guy at the top makes a big mistake.
OTOH, I can easily see how Xi figures he can get through this. His advantage is that he doesn’t care that much about private wealth. The people who were lending and speculating are probably a lot richer than ordinary Chinese citizens. Maybe Xi can figure out a way where they all take haircuts while the people who were just buying places to live get to keep their apartments. China ends up with lots of buildings and bridges and roads and railways that will be useful for the next 50 years.
Youth unemployment is solved by demographics. Naysayers are censored out of existence. The economy rights itself with a very well educated cohort ready to move into productive work.
What do other people think?
Did you know that in China there are fifty six cities with over a million people?
These 2 are part of the problem. There are more than enough apts to go around and die to China’s shrinking population they probably won’t need to build much more anytime soon.
That’s a glass half full type of thing. The recent building spree means they don’t have to spend as much human labor on building in the next few decades. That frees up workers who can produce other consumer goods.
OTOH, the sudden change means that workers have the wrong skills. Building cars probably involves different skills than building highways. The transition is difficult. Xi probably thinks he is on the right track long term, the transition is temporary. Western politicians wouldn’t make that trade.
I think you are under-estimating how material the demographic problem actually is.
Chinese people absolutely hammer their kids to study, study, study…with the logic that getting into a good University will allow them to write their own ticket for a succesful career (that earns a good salary).
Thats all going up in smoke due to the implosion of internal demand in China (this is a byproduct of their collapsing property investment scheme which drove about 35% of GDP growth).
That property implosion is serious and widespread. Many local authorities relied on selling land to developers for revenues, and that has all dried up so
they now have serious balance sheet problems. They need many billions in extra funding.
They are attempting to do a sort of controlled property investment reduction (implosion really) right now, but with both internal (Chinese) and external (foreign) bondholders of the major Chinese property groups, the situation is extremely messy.
Thats why the economic trajectory for China is flatlining, and there is really no chance in the immediate future that China will surpass the US.
With the additional sanctions on China from the US, EU, and likely UK on high technology components, they won’t be moving into the lead on the AI front. They are only really a threat when it comes to renewables because of their ability to mass produce cheaply (and then do some economic dumping via exports), and their stranglehold on the extraction of various rare earth minerals.
So yes, Xi won’t be going anywhere anytime soon but I would not expect China to be an economic threat for the foreseeable future. They just have too many internal problems and they are turning inwards culturally as well.
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I hope I live to see the day that Chinese communism falls, and answers Nuremberg-style for its crimes over the decades.
I agree they are looking at a recession caused by the construction bubble popping. The question is “Does this indicate a fundamental problem with authoritarian regimes?” or is it just something that happens from time to time. The US had it’s own real estate bubble, for example.
Xi’s defense would be that he saw the bubble and moved to deflate it sooner than a democratic government would have.
The same is true about technology. Modern democratic nations would have troubles if a number of large trading partners all agreed to stop exporting the same class of important goods. Is China in a worse position to deal with this because it is authoritarian?
And, why do they have that stranglehold? Xi would say it’s because a forward looking regime was able to make decisions that a democratic government wouldn’t. He would make the same arguments regarding lithium and cobalt and solar panel construction.
It looks like Xi made the right moves on renewables while the democratic nations were arguing about LGBTQ rights.
I’d like to believe that there is something about authoritarian that isn’t compatible with modern economies. I see the same current problems that you do, but I’m questioning if they are really systemic to authoritarian governments.
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Well, Adam Smith called it the “Slapping Hand”…
Nothing, anyone??
You’re too subtle for me.
The main weakness of authoritarian regimes is that they massively stiffle innovation. They tend to focus on stealing technological advances from the west (the old USSR operated under the same principles).
In order to be able to innovate well, you have to be in an environment were free thinking and creativity is allowed to flourish.
Thats why the US will always end up better off vs China.
The US recruits highly intelligent immigrants from the entire world because they are attracted to what the US offers. This then materially boosts the US’s ability to innovate in many scientific areas.
The same people do not want to go to China because it is not a healthy, free-thinking society. Too much censorship damages innovation as it constrains intelligent people from emigrating there.
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That is exactly what I want to believe. I could have written it myself.
I don’t think the current financial implosion due to the housing/construction bubble is evidence of that.
Xi would claim that immigration is irrelevant if you have 1.4 billion people. Certainly, there are enough smart people in China to discover and develop new technologies. And, China’s authoritarian gov’t will do a better job of protecting Chinese IP than western nations have done.
Yeah, I don’t enjoy being the devil’s advocate here. I just don’t see the evidence for what I want to believe yet. Maybe this is a case of “only time will tell”.
They have loads of people, sure, but I don’t think it’s any coincidence they don’t have a real Silicon Valley equivalent. All of their innovation is off stealing IP, which has served them really well. I think if Xi had done a great job managing the country they’d be all hunky dory until they caught up and then they’d really face problems as they ran into the issue of innovating for themselves.
The current issues are all just own goals. The combination of catastrophic family planning regulations with a property bubble has managed to stifle an economy that should be growing gangbusters. It’ll be fascinating to watch the China v India comparison.
Its not the amount of intelligent people that is the constraining factor inside China.
The issue is that when your economy is dominated by State Industries, developing ideas and risk taking is taboo, primarily because you will likely end up crushed by the system if you go too far.
Look what happened to Jack Ma. Until private enterprise is not suppressed like that in China (unlikely to happen with Xi around), and the State takes more of a backseat (massive corruption problems due to a bloated State sector), I don’t see China advancing much in terms of economic development.
India will end up with similar problems as China due to massive levels of corruption, as well as an inefficient and bloated State beauracracy.
China and and India are only on the world stage due to the size of their populations (scale does give some advantages), but if you adjust this to a per capita level, they are both middling countries with pretty average growth prospects.
I don’t see either country getting out of the middle income trap. India due to how fractured society is (along tribal and religious lines), and China due to how they use the State as a club to suppress private industry (for ideological reasons).
I think this is the best argument I’ve seen for “authoritarian doesn’t co-exist with innovation”. I expect that Xi believes that in the US, rich people can get so rich they can dictate to political leaders (whether or not that’s true). He has a vested interest in being sure that nobody gets that rich.
I’m assuming that it extends well below Jack Ma.
The issue is that when your economy is dominated by State Industries
I don’t know that authoritarian means the economy has to be dominated by state industries. That’s an interesting question. Does the need for control extend to controlling big chunks of the economy directly?
Maybe the connecting factor is corruption. I assume that authoritarian does require corruption at some level because the guy on top needs to buy off the people in the next couple tiers, and corruption is the efficient method.
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The people in power (communist party) in China are big into relationships to extend their proverbial political tentacles around the country.
Its not unusual for party “picks” to be given plum roles in key industries that have material amounts of State control. These “picks” are then loyal to the person (and party) who appointed them from above. Its a political patronage system really.
This then also filters down to the local governments. Same problem with the local party leaders appointing their favoured person to a plum role.
Obviously, this sort of problem happens even in developed countries (specially in public roles), but because of the size of the State in China (vs western developed countries) it becomes a far larger problem which creates material economic inefficiencies.
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That’s a good point that connects directly to authoritarian. The need for control means you put loyalists into positions that should be filled based on economic competence rather than loyalty to the Leader. That can happen even if the firm is nominally private. Just an expectation to have some political appointees in positions with some power.
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Sounds rather feudal when you put it like that