Without knowing much of the Chinese economy, the obstacles for its future growth appear impressive & solid as many observers fortunately notice now. Here are the standard arguments:
1. China has passed from extensive growth (peasants to industry) to intensive growth. No luck.
1. China has passed from extensive growth (peasants to industry) to intensive growth. No luck.
2. China is likely in a middle-income trap at a GDP of $12,500 per capita. Then growth suddenly falls. South Korea and Taiwan required democratization & major structural reforms to get out of their middle-income traps. China is now turning in the opposite direction.
3. Xi Jinping reminds me most of all of East Germany's Erich Honecker, who came to power in 1971 on the basis of the party & the security police, just like Xi. He stifled all the successful economic reform that even Walter Ulbricht had started. The GDP ended in 1991.
4. China's economic success has been based on common sense, more market, more private enterprise, globalization & utilization of foreign technology & foreign-trained labor. Xi is successfully destroying all of it.
5. Since 1978, China has had some 4 million citizens graduating from fine foreign universities. Allegedly, 3 million has already departed from China & Xi chases ever more out & sidelines them.
6. Slowly, the West is realizing that it should not allow China to steal its technology. This takes time, but the process is underway. The US technology boycott is catching on & the rest of the West is bound to follow.
7. Western companies are gradually realizing that they either work in Xi's China or in the West, but certainly not in both. Needless to say, most will choose the West. Who would like to retire in China? Not Chinese millionaires at least.
8. In his outstanding book "Red Roulette," Desmond Shrum explains how corrupt the Chinese system is. It sounds so Russian. You need support from a Red Aristocrat, resources from a state-owned enterprises, but private executive power to succeed. = authoritarian kleptocracy.
9. So far, China has thrived on being pretty poor (no longer), investing far too much (=credit bubble to burst), foreign inputs of technology & people (scared away), expanding labor force & migration from countryside to cities. All this has ended. What comes next? Stagnation.
10. Indeed, as the FT columnist Ruchir Sharma concludes: "If anything, 2.5 per cent [GDP growth] is an optimistic forecast..."
ft.com
ft.com
Loading suggestions...