The narrative about China has changed with stunning speed, from unstoppable juggernaut to pitiful, helpless giant. How did that happen?
My sense is that much writing about China puts too much weight on recent events and policy. Yes, Xi Jinping is an erratic leader. But China’s economic problems have been building for a long time. And while Xi’s failure to address these problems adequately no doubt reflects his personal limitations, it also reflects some deep ideological biases within China’s ruling party.
Many analysts attribute China’s loss of dynamism to Xi, who took power in 2012 and has been consistently more hostile to private enterprise than his predecessors. This seems to me to be too glib. Certainly Xi’s focus on state control and arbitrariness haven’t helped. But China’s slowdown began even before Xi took power.
And China has an incredibly high national savings rate. Why? I’m not sure there’s a consensus about the causes, but an IMF study argued that the biggest drivers are a low birthrate — so people don’t feel they can rely on their children to support them in retirement — and an inadequate social safety net, so they don’t feel that they can rely on public support either.
The obvious answer is to boost consumer spending. Get state-owned enterprises to share more of their profits with workers. Strengthen the safety net. And in the short run, the government could just give people money — sending out checks, the way America has done.
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