An intriguing subplot in recent world news is that Xi Jinping, who they’ve been telling us for years will be the next president of China, has been totally out of public view. Naturally that’s spawned tons of rumors and speculation.
Now the word’s out that he’s just been recovering from some back problems, which doesn’t seem totally credible to me. Time will tell, but this whole episode is an important reminder that the real vulnerability of the Chinese economy isn’t about this or that rumor of excess housing or some bad loans it’s the political system. China’s leadership has put a pretty solid 30 year run of steadily improving policy together, but the system is completely opaque and nobody really knows what’s going on at any given time. The moral case for democracy is a lot deeper and broader than that, but there are important pragmatic reasons for democracy’s success. An open competitive electoral system with clear rules and procedures lets people form some kind of reasonable projections about what will and won’t happen in the future. With China it’s really anyone’s guess what turn policy will take in a year or how bad the negative feedback loop between politics and economics might get if they hit a downturn.