A series of problems such as declining productivity in mainland China, falling imports and exports, rising unemployment, intensifying debt crisis, deteriorating economic environment, and the withdrawal of foreign capital have led to a slowdown in China’s economic growth. (Johannes Eisele/AFP)
[The Epoch Times, October 1, 2023](Epoch Times reporters Song Tang and Yi Ru interviewed and reported) Since the beginning of this year, China’s economy has experienced a structural downward turning point. The analysis pointed out that the false propaganda of the “China (CCP) model” that has long been promoted as being able to promote rapid economic growth has been exposed.
Analysis pointed out that in fact, the so-called “China (CCP) model” is a package of CCP propaganda. The truth that promotes China’s economic growth is that the authorities have relaxed control over the economy, the United States has opened its market to China, and the extreme poverty brought about by Mao’s era cheap labor, and the latecomers learning from the experience of the Four Asian Tigers, etc. Since the second term of the Xi administration, the above factors have slowly disappeared, completely limiting the future of China’s economic development.
Under the strong state intervention of the Xi administration, both the people and capital lack confidence. In August alone, capital outflows reached US$49 billion. The Hang Seng Index, which reflects Hong Kong’s stock market, plummeted and touched its 20-year moving average.
The CCP model does not exist
The so-called China model refers to the introduction of market economy elements while ensuring the one-party dictatorship of the Communist Party of China, and using state intervention in the market to ensure economic growth. Since 2008, the CCP began to promote the “China (CCP) Model”, saying that the “China Model” has formed a relatively stereotyped system. However, this propaganda deliberately avoids Western factors and specifically emphasizes the leadership of the Communist Party.
Huang Yasheng, a professor at the Massachusetts Institute of Technology who has long been concerned about the factors of China’s economic growth, recently wrote that China’s economic growth in recent decades, some people think that China’s economic miracle is another successful model outside the West, mainly due to the power of the country. , while market finance, rule of law and property rights are unnecessary.
But he believes that, contrary to this view, economic nationalism is not the savior of the Chinese economy, but a threat to the Chinese economy. China’s economic miracle occurred because the government abandoned central economic planning and made room for a market economy.
In the 1980s, China’s first wave of reforms was initiated by rural areas. Farmers risked being beheaded and initiated the “big contract system”, “household responsibility system” and the “land joint production contract responsibility system”. Afterwards, the CCP took advantage of the trend and launched reforms. The development of the economy is precisely the result of the CCP abandoning planned economy and non-interference.
Deng Xiaoping admitted in 1987, “In the rural reform, the biggest gain that we did not expect at all was the development of township and village enterprises, which suddenly emerged to engage in various industries, engage in commodity economy, and engage in various small enterprises. This is not The achievements of our Central Committee.”
Huang Yasheng said that the reformist leadership of the Communist Party of China has not stifled the spontaneous, bottom-up rural entrepreneurship spirit. China’s economic take-off is because of the state’s letting go, not because of state intervention.
For example, he said that the regions with the strongest economic performance since 1978, including Guangdong and Zhejiang, are regions with the highest degree of marketization and the least state intervention. On the other hand, regions with the most state intervention, such as northeastern China, are mired in high debt and struggling with lower growth rates.
The United States guides China into the international market
Deng Xiaoping’s reform and opening up in the 1980s coincided with an international environment that was favorable to the CCP authorities. In order to deal with the Soviet Union, the United States showed goodwill to China. China was able to trade with the West, which truly helped solve China’s economic development problems.
Zheng Xuguang, an economist living in the United States (authorized by Zheng Xuguang)
Political and economic scholar Zheng Xuguang, host of Xuguang Commentary, told The Epoch Times that Mao Zedong restored relations with Nixon in his later years, and later Gorbachev’s visit to China in 1989 restored relations with the United States and the Soviet Union, which had a great impact on China’s economic development. Create a positive environment.
The most difficult period for China’s economy was actually the period when it broke up with the Soviet Union. Later, the relationship with the United States was restored, and a lot of trade with Japan and Western European countries began. It began to be able to introduce some Western equipment projects, which alleviated many economic problems. question. In the past, they were all old machine tools that had not changed for decades, but now you can get relatively new machine tools, such as Baogang, which was developed during Hua Guofeng’s period.
He said that since the 1980s, there have been several hurdles. The United States has opened up. Nixon’s visit to China gave China the opportunity to return to the United Nations. Clinton decoupled human rights from most-favored-nation status. In 2001, China joined the WTO.
“Generally speaking, it is the policies of the United States that have guided China to return to the international community, enter the international market, and introduce technology, equipment and management capital. China is equivalent to borrowing the development opportunities brought by opening up. Production efficiency has improved instantly, and the U.S. market has If you open up, the wages of Chinese workers will rise significantly.”
Zheng Xuguang said that China is like an economic depression. Once the dam is opened, wealth will flow into the depression in China. In addition, there is a big gap between you and others. Because you are lagging behind, you can develop quickly and just copy other people’s experience.
He said that the first one was not to engage in revolution and promote production, but to allow self-employment. Because state-owned enterprises are nominally owned by the state, but the state is virtual and property rights are unclear, so they are all in vain. Household property rights are a disguised version of private ownership, allowing three or five people to be employed, who are not considered capitalists. The other is opening up to the outside world, and the market mechanism can be restored.
“A country like China with a state-owned system is inherently detrimental to the economy, but with artificial barriers opened to it, China’s economic growth can be said to be rapid. This is a bad economy, but it can have a good economy. The reason for growth performance. In the past, the economy was tightly controlled, and the private economy was in a dark and gray state. Now you are allowed to do business legally, and the economy suddenly revives.”
Emulate the Four Asian Tigers but reject political reform
China’s economic development during the so-called reform and opening up period initially followed the experience of the Four Asian Tigers. When the United States opened up to China, it promoted a wave of economic growth through investment promotion and export processing. However, the CCP has not carried out political reforms like South Korea and Taiwan, which has completely restricted the future of China’s economic development.
William Yu, an economist at the Anderson School of Management at UCLA. (Yang Yang/The Epoch Times)
Yu Weixiong, an economist at the Anderson School of Management at the University of California, Los Angeles, told The Epoch Times that Western Europe and the United States are a Western model in which political freedom, democracy and economic freedom complement each other. After World War II, the Four Asian Tigers were relatively autocratic regimes at first, but they chose to connect with the world and carry out economic liberalization, creating an economic miracle.
“China later learned this model, and learned it very well at first. Although the politics was not completely liberal and democratic, the economy began to have freedom and the economy developed rapidly. The main reason was that there was little resistance to many reforms, and it was easy to attract foreign investment. It’s convenient, and ordinary workers have no rights and can tolerate pollution.”
He said that this political intervention seemed to help the economy grow rapidly at first, and they mistakenly thought that it could continue forever. But things are different now. In the globalized system, your wage costs are so high. If you continue with that system, it will be ineffective.
Wang Wangochen, an assistant researcher at the China Economic Research Institute, explained to The Epoch Times that in the beginning, the four Asian tigers generally had limited authoritarianism. When the labor intensity of exports was relatively low, they could promote economic growth to a certain extent. But this kind of cheap labor and low production costs will have a growth limit.
“In fact, since 2008, wages in mainland China have slowly increased, and they have also paid more attention to environmental protection. Recently, there has been no preferential tax for foreign investment. Mainland China’s production costs have no advantage. This can indicate that exports will definitely decline, driving the growth of related occupations. Layoffs or reduction of investment.”
He said that in the face of middle-income constraints, autocracy is harmful. Technological innovation is just the opposite of authoritarian economy. If a country does not have open space, it will be difficult to carry out industrial or cultural innovation.
Wang Wangochen, assistant researcher at the China Economic Research Institute (provided by interviewee)
Wang Guochen said that like Taiwan or South Korea, democratization is adopted to relieve the demands of the ruling party that is performance-oriented. Mainland China is now unwilling to democratize. Instead, it has begun to return to control. Through state capitalism and the leadership of the Communist Party, it is forced to continue to prove political performance or economic growth in order to break through the middle-income trap.
Yu Weixiong said that when the economy reaches a certain level, new driving forces can be found through changes in the political structure to allow the economy to continue to move forward. Now China has reached this point, but the Communist Party has a one-party dictatorship and is unwilling to decentralize power. It has not taken advantage of the trend to carry out political reforms like South Korea and Taiwan. This will completely restrict China’s future economic development.
“Because the political structure has not been adjusted and improved, such a political system cannot cultivate a new economy and new innovations. It is impossible for one person in Zhongnanhai to control the situation across the country. There must be someone from below. There are democratic institutions in the world to do some checks and balances, but China does not have such institutions, so I think the situation in China is very difficult.”
Keeping the Chinese Communist regime on track to turn back
Now the Xi administration is cracking down on private enterprises internally and de-globalizing and de-Americanizing externally. At the same time, there is no political transformation like Taiwan and South Korea. Several factors that once contributed to China’s economic development have slowly disappeared.
Huang Yasheng said that although China has never had an American-style constitution, under the leadership of Deng Xiaoping, the Chinese (Chinese Communist Party) government got rid of Mao Zedong’s totalitarianism, bringing a sense of security and confidence to entrepreneurs. For example, in 1979, the government released capitalists imprisoned during the Cultural Revolution and returned their confiscated deposits, bonds, gold, and private residences.
He said that under Xi Jinping, Chinese capitalists have once again been marginalized, harassed, excluded and arrested. In July 2021, billionaire Sun Dawu was sentenced to 18 years in prison for speaking out. China is heading towards the Cultural Revolution, and Chinese capitalists are unwilling to invest anymore and are transferring their funds abroad.
Zheng Xuguang said that Xi Jinping must first maintain power, that is, the party’s sustainable governance. Only under this premise can he consider giving more space to the economy. In fact, during Xi Jinping’s second term, he has destroyed the economy, damaged relations with the West, and led to a lack of confidence in investment and consumption.
Bao Fan, the founder and CEO of China Renaissance Capital Group, has been out of contact for more than 50 days. China Renaissance Capital has been suspended from the market on April 3, while China’s financial, political and business circles are still in shock. The picture shows the headquarters building of Beijing Huaxing Capital on February 27, 2023. (Greg Baker/AFP)
He said that there is no need for your government to exert any force. It only needs the government to open the door and allow foreigners to do business in China and allow Chinese people to do business. The reason why China’s economy has not recovered well after the epidemic is that there are problems in these two areas. Both foreign and local Chinese capitalists have lost confidence, and they will eventually make a choice.
“If you de-globalize and de-Americanize, the economy will inevitably shrink. Xi Jinping is engaged in One Belt and One Road, but One Belt and One Road has no ability to help China. It also expects China (the Communist Party) to help them. In addition, do you have a chance in the industrial revolution? You are closed There are fewer opportunities to get up.”
Yu Weixiong said that in the past three years, due to the impact of the epidemic, not only the Chinese people have truly realized that the CCP system is the fundamental problem, but even the CCP itself has also realized it.
He said that politics and economics will eventually be united. In the late 1970s, the Chinese people discovered that they had been deceived and that communism simply did not work. They woke up earlier than the Soviet Union, and China’s rural areas began to reform from the bottom up. A reform that makes life better. After decades of development, when private enterprises become successful and have their own voice and influence, that would be a big taboo, and an authoritarian regime will not allow it.
“He is politically unable to cooperate in making reforms, which results in the results of economic reforms being forced to be reversed. Even though Beijing knows this is not feasible, it still does this. I think this political system is very sad.”
Wang Guochen said that from a structural point of view, if mainland China does not want democratization, it will inevitably become more authoritarian or centralized. In this case, no matter who comes to power, they will introduce people like Xi Jinping, and the entire trend may not be sustainable. reverse. Therefore, it is difficult to say whether the Communist Party needs Xi Jinping, or whether Xi Jinping has created a more totalitarian Communist Party?
“Of course, exceptions still exist. For example, like Gorbachev in the Soviet Union, we do not rule out the possibility of some reformists suddenly seizing power. But judging from the overall structure or trend, even if Xi Jinping comes down, the entire trend may not be reversed. “
The outside world generally believes that China’s economic prospects are bleak. (Andrea Verdelli/Bloomberg via Getty Images)
China’s economy: The future is not optimistic in the short or long term
Wang Guochen said that now the private sector is less willing to invest and consume, and the government’s return on investment has been declining. If the government relies solely on investment or consumption, its debts will increase in the future. Therefore, if the power of the people does not come forward, it can be expected that mainland China’s economy will continue to decline.
Yu Weixiong said that there are problems in China’s economy at several levels. The first is the structural level, excessive investment, excessive leverage, real estate bubbles, etc., which have become bigger and bigger in the past two decades, and the entire bubble has finally Going to ruin.
The second level is the Communist Party’s interference in enterprises. Not only are Chinese enterprises scared to run away, but foreign capital is also afraid to come in again. Now the policy has returned to the tight line of totalitarian dictatorship in the past, which will reduce the confidence of the people, enterprises, foreign capital, and investment in China.
The third is the overall international environment. China and the United States are now engaged in a new Cold War. Everyone in the U.S. government and opposition parties now knows that with China’s economic and technological strength, China (the CCP) is now the biggest threat to the United States. The military, national security, and geopolitical threats are far more serious than Russia.
He said that under the new Cold War pattern, many decoupling and de-risking policies are being continuously introduced, which will also make China’s economy even worse. Therefore, I am not optimistic about the future of China’s economy in both the short and long term. ◇
Editor in charge: Lin Yan#
2023-10-01 11:23:06
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