Like communist China’s ability to get things done through top-down authoritarian measures? (Yes, Thomas Friedman, this question has you in mind.)
Perhaps Gordon G. Chang’s latest Forbes column will prompt a reconsideration of basic premises.
In late 2008 Premier Wen Jiabao embarked on a massive stimulus program. Today Wen is struggling with the inevitable aftermath: persistent inflation; a steep rise and sudden decline in the stock markets; and the creation and popping of a massive property bubble. As a result, thoughtful observers call his debt-fueled growth “fake.”
Today investors want more hair of the dog that bit them. Unfortunately, Premier Wen’s tactics have run their course. China now has all the high-speed rail lines to nowhere and “ghost cities” it can handle. And the country has more debt than it can pay back, especially at the provincial level. As economist Lang Hsien Ping says, every province in China is Greece. The country’s debt-to-GDP ratio is about the same or worse than America’s, depending on how Beijing’s “hidden debt” is counted.
Yet there is an even more fundamental problem. Investors are under the misapprehension that the Chinese government created 35 years of virtually uninterrupted growth, and that technocrats can now save the economy.
That perception is wrong. We call Deng Xiaoping a reformer and give him credit for the startling transformation of the Chinese economy. We believe his dictatorial state first debated, then planned and finally decreed change. Yet reform, in reality, progressed more by disobedience than design.
