Sun, Sep 09, 2018 - Page 7 News List

What a Chinese superpower would look like

China aims to expand its influence from one polar cap to the other, but debt, demographics and a middle-income trap stand in the way

By Marc Champion  /  Bloomberg

To date, no large economy has made the transition without liberalizing.

Western economic laws do not apply, Xi loyalists have said; the strategic smarts of the party will let China blow through the middle income trap — even without the independent judiciary and property rights that fostered innovation elsewhere.

Xi has urged China’s scientists to trust a socialist system that stunned the world by producing nuclear and space programs during the 1960s.

“By tightening our belts and gritting our teeth, we built ‘two bombs and one satellite.’” Xi said in an April speech. “The next step is to do the same with science and technology.”

Under Xi, the party has swallowed the more technocratic government, taking over many of its functions.

Major companies have party cells within them. That is a good thing, in the view of the president’s followers, because it ensures control by a 90 million-strong organization that has developed as a relatively efficient meritocracy.

Criticism of China’s heavy corporate debt burden at home — about two-and-a-half times GDP last year — and potential defaults on white elephant infrastructure projects overseas are misplaced, the thinking goes. That is because clever party officials choose the projects that receive big loans.

The US itself even relied on central planning to supercharge its economy, in World War II, McGregor said.

“We’re kind of full of ourselves,” he said of the West. “We talk all this stuff about the superiority of free markets, but how did the US become an economic superpower?”

Xi’s consolidation of power has some worried that the scope for bad decisions that go unchallenged is growing.

At the National Museum of China in Beijing, a permanent exhibit tells China’s history since the 1839-1842 Opium War as a morality tale of colonial oppression, followed by uninterrupted party success.

It skips over Mao Zedong’s (毛澤東) Great Leap Forward and Cultural Revolution, which caused tens of millions of deaths and vast economic damage.

Sycophancy tends to grow with one-man-rule, said Joerg Wuttke, former president of the European Chamber of Commerce in Beijing.

He said he worries also that the party is draining talent from the very bureaucracy on which China’s leaders are depending to deliver sustained prosperity.

All of this, according to Wang Wen, is to fundamentally misunderstand China by trying to fit it into Western experience.

He cites the doom-laden warnings of Chinese over-leverage and over-planning that have proved wrong for decades.

“Our country has entered a very interesting phase that the Western social sciences can’t explain,” Wang said. “If you use Western theory, you cannot understand China’s foreign policy.”

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