China’s New Normal and America’s Old Habits

NEW HAVEN – China is generating a lot of confusion nowadays, both at home, where senior officials now tout the economy’s “new normal,” and abroad, exemplified by America’s embrace of Cold War-style tactics to contain China’s rise. On both counts, the disconnects are striking, adding a new dimension of risk to the impact of the “China factor” on a fragile world.

The official view in China is that its economy has already arrived in the Promised Land of the “new normal.” Indeed, that was the theme of the just-concluded China Development Forum (CDF) – an important platform for debate among China’s senior officials and a broad cross-section of international participants that occurs immediately after the annual National People’s Congress.

Since the CDF’s inception in 2000, the Chinese government has used the event to signal its policy priorities. In 2002, for example, the CDF focused on the impact of China’s accession to the World Trade Organization – a precursor to a spectacular surge of export-led growth. In 2009, the emphasis was on China’s aggressive post-crisis stimulus strategy. And last year’s event addressed implementation of the so-called Third Plenum reforms.

This suggests that China’s “new normal” will be the government’s top priority this year. But there remains considerable ambiguity as to what exactly the new normal entails – or whether it has even been achieved.