Japanification, Slow Decline, or Renewed Boom
Rick, I assume you have chatted directly with Nick Lardy, if not see his PIIE piece that came out this past week. Note Nick had an office just across from Hugh at Yale when I was a grad student, I’d often chat with him while waiting to see Hugh [Patrick].
I have an Chinese 2023Q2 automotive update just out on SeekingAlpha, the link is here but I’ll email a pdf. Key takeaway for you: this year car sales will likely remain close to but below the 2017 peak. Now the average car is much more expensive than in 2017, but employment in the industry is likely falling.
You state that:
"In the West, Nicholas Lardy argues that a return to market-oriented policies would enable China to grow 6% to 7% per year for the next decade; if it does not do so, its growth will languish at 3-4% per year for the next four to five years"
In Nicholas' article he states:
"China’s private sector, which led the rapid growth of the domestic economy during the past 30 years, has lost its power due to political regulations by Chinese authorities...private sector investments have steadily decreased as a result of Chinese President Xi Jinping consistently strengthening regulations while espousing qualitative development rather than economic growth...private sector investments “rapidly weakened starting with the beginning of last year"".
At no point does Nicholas actually explain what the regulations are/were, or how significant (quantity) and prolonged (duration) the decrease in private sector investments were. Nicholas also does not explain what specific "market-oriented policies" are required. Why not? These arguments are not properly explained or substantiated. Additionally, talk is made of "negative conditions", which later are revealed to include a 75% increase in Chinese companies sanctioned by the US, and restrictions on exporting cutting-edge technologies to China (which ironically is driving China to develop more of its own - see recent news re: the new Kirin 9000s chip in Huawei's Mate 60 Pro for example). Despite this, China is expected to grow c. 3-4% for the new four to five years. We should ask ourselves - how much of China's slower growth is attributable to Chinese government regulation, and how much to Western attempts to retard it?
I understand that the West would like China to be more of an economy and government in its own image (and therefore more open to Western corporate interests). In the West, we live in a society where private capital has significant influence both on the economy and on government. In China it's very much the opposite. Understandably, many of us are uncomfortable with this. However, as the phrase "qualitative development" hints at (which means growth that enhances the quality of life, not just economic growth for its own sake), China is concerned about quality of development, including wealth inequality. This is why, for instance, we have seen Chinese government regulation banning for-profit tutoring firms. From a capitalist standpoint, this intrusion on private financial interests is understandably alarming. I know this is an economic newsletter and as such financial interests will prevail in the discourse, but from a social equality and equality of opportunity perspective, I believe there is much to commend it.