The Chinese economic model – China’s strongman leader has a new economic agenda
America’s confrontation with China is escalating dangerously. In the past week the White House has announced what may amount to an imminent ban on TikTok and WeChat (two Chinese apps), imposed sanctions on Hong Kong’s leaders and sent a cabinet member to Taiwan. This ratcheting up of pressure partly reflects electioneering: being tough on China is a key strut of President Donald Trump’s campaign. It is partly ideological, underscoring the urgency the administration’s hawks attach to pushing back on all fronts against an increasingly assertive China. But it also reflects an assumption that has underpinned the Trump administration’s attitude to China from the beginning of the trade war: that this approach will yield results, because China’s steroidal state capitalism is weaker than it looks.
The logic is alluringly simple. Yes, China has delivered growth, but only by relying on an unsustainable formula of debt, subsidies, cronyism and intellectual-property theft. Press hard enough and its economy could buckle, forcing its leaders to make concessions and, eventually, to liberalise their state-led system. As the secretary of state, Mike Pompeo, puts it, “Freedom-loving nations of the world must induce China to change.”
Simple, but wrong. China’s economy was less harmed by the tariff war than expected. It has been far more resilient to the covid-19 pandemic—the imf forecasts growth of 1% in 2020 compared with an 8% drop in America. Shenzhen is the world’s best-performing big stockmarket this year, not New York. And, as our briefing explains, China’s leader, Xi Jinping, is reinventing state capitalism for the 2020s. Forget belching steel plants and quotas. Mr Xi’s new economic agenda is to make markets and innovation work better within tightly defined boundaries and subject to all-seeing Communist Party surveillance. It isn’t Milton Friedman, but this ruthless mix of autocracy, technology and dynamism could propel growth for years.
This article appeared in the Leaders section of the print edition under the headline “Xi’s new economy”
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