China’s Imagination Deficit
Despite facing a flagging economy, powerful demographic headwinds, and an escalating rivalry with the United States, the Chinese government appears unwilling or unable to devise a new approach to policymaking. Instead, it continues to rely on stale tactics, while attempting to draw inspiration from ideology.
NEW HAVEN – China is at a critical juncture. Its deflation-prone debt-intensive economy is seriously underperforming. Its government has become embroiled in a major superpower conflict with the United States. And it is staring down the barrel of a demographic crisis. Worst of all, Chinese authorities are responding to these challenges more with ideology and stale tactics from the past, rather than with breakthrough reforms. Imaginative solutions to tough problems are in scarce supply.
As a diehard China optimist for most of the past 25 years, I haven’t come to this conclusion lightly. My Yale course, “The Next China,” made the case for a powerful shift in the Chinese growth model, from an investment- and export-led economy to one driven by domestic consumption.
Yes, I worried that China’s porous social safety net – both for retirement and health care – could lead to a rise in fear-driven precautionary saving that would inhibit consumer demand. But, viewing these concerns more as challenges than risks, I remained convinced that China would ultimately rebalance its economy.