Must-read. I've hit some of the highlights below, but it's all important because China is important — the gorilla about to break out of the cage, or not.
Can China escape the middle income trap? The answer will have huge consequences for both the global economy and the potential emergence of a new world order centering on Eurasia, in which the US is peripheral. Is Xi Jinping the next Deng Xiaoping, or will his administration be a flash in the pan? The world awaits, and the US won't be helping.
Beijing Renmin University professor Zhao Xijun breaks it all down: "The timing of the 13th five-year plan is crucial, because by 2020, the nation is supposed to have met its first centenary goal, marking the 100th anniversary of the party's founding [in 1921], to complete the building of a moderately prosperous society."
Yet how’s that superhuman task to be accomplished? Essentially, by Beijing shifting the focus from labor intensive manufacturing leading to exports, the basis of the model so far, towards a service/consumption economy, with a key role also for modernized agriculture.Meet Liu He.
Everyone in Asia knows how Chinese manufacturers have been steadily losing that famous “competitive edge,” as labor and land costs rise, especially in the developed Eastern seaboard. So Xi’s “new normal” implies a complex process of transferring jobs from manufacturing to the service sector. That also implies increased Chinese innovation in technology, industry, design and business management.…
…the man with the plan: Liu He, one of Xi’s top economic advisers, an industrial economics graduate of Renmin University with a Masters in public administration at Harvard.
Liu He also happens to be the vice-director of the National Development and Reform Commission, the all powerful agency that creates policies for China’s economic and social development.
And he is the cherry in the cake, a zombie killer.
“Zombie killer”, in a Chinese pop context, means someone who wants to close down for good dodgy businesses known as zombie enterprises.
So naturally Liu He is a man they love to hate, as many of the zombies are powerfully-connected state-owned companies (SOEs). Local governments refuse to close them down because they fear bad loans spiking up; rising unemployment; and a huge drop in their local fiscal take.
On the record, Liu He is totally pragmatic; he insists China needs “market-oriented reforms, more management focus on supply, intensified efforts in shutting down zombie firms and an end to overcapacity.” But this structural adjustment must be gradual; the CCP is terrified of unemployment and social instability.
As if his zombie business was not enough, Liu is also head of the General Office of the Leading Group for Financial and Economic Affairs, China’s number one economic policymaking body chaired by, who else, Xi.
Liu He was instrumental in approving China’s 4 trillion yuan stimulus package in 2009, which was Beijing’s counterpunch against the 2008 Wall Street provoked global financial crisis.
So he will be the go-to man for all economic policies, and how fast they should advance. But top Chinese economists stress that everything related to hardcore politics and governance of SOEs will be handled by CCP bigwigs, if not Xi himself.…RT
China’s 2020 vision
Pepe Escobar
What are their views on a job guarantee?
ReplyDeleteHard to know exactly what China's employment rate is, but it's reportedly low and the labor market is tight with rising wages. So at this point a JG doesn't seem to be an issue. It joblessness became an issue, I have little doubt that the Chinese leadership would know how to handle it. It's pretty much a no brainer in a country where capital doesn't have a lot power over labor.
ReplyDeleteThe Chinese people in general seem to be OK with one party rule as long as the living standard is increasing and people have confidence that next year will be better than this year as this year was better than last. This will likely be the case a long as China is expanding and it still has a long way to go before it becomes a developed country.
The article indicates that joblessness may be an issue, hence the need to manage the transition carefully. No mention of a JG as a backup measure.
ReplyDeleteRight. As they cut back on the export sector and ramp up the consumer/services sector they will have to fit people into new slots as they are laid off. How they intend to handle this, I don't know, but I am sure they do.
ReplyDeleteWhereas the mainstream here would say "hands off, just allow the market be the zombie killer".
ReplyDeleteWhereas the mainstream here would say "hands off, just allow the market be the zombie killer".
ReplyDeleteThis is the difference between the Chinese and mainstream Western economists. The Chinese recall the Great Depression and how well the market dealt with it. They are also aware of Keynes and most likely Post Keynesianism, too. They are not dogmatic Marxist-Leninist-Maoists anymore, but they haven't forgotten those lessons either.
We are seeing economics "with Chinese characteristics" in the making. Neoliberals are sure that it will fail because "freedom." We'll see.
BTW, Japan didn't let the market kill its zombie banks in the 80's, and now the West is not letting the market kill its zombie banks either. We'll see how that goes.