Conventional Wisdom Turning Bearish on China

Lead peeping in Beijing

Photo by Ed Jones/AFP/Getty Images

It seems to me that the conventional wisdom on China has completely turned around from where it was a few years ago. Once seen as an unstoppable juggernaut, virtually everything I read about China these days involves forecasts of doom. Kate MacKenzie’s overview of recent reporting on Chinese corruption offers what is, I think, the strongest bear case—the political system simply isn’t up to snuff for further growth.

Recall that China’s past 25 years of enormous growth have come from a pathetically small initial base. Looked at in one light, those huge GDP numbers look like an amazing policy success. But the right thing to say is that they’re probably a measure of the scale of China’s stupendous policy failures before Deng Xiaoping. If back in the 1950s, ‘60s, and ‘70s, Chinese Communism had managed to deliver propserity as effectively as Soviet Communism (i.e., a not-so-high bar) then the reforms of the 1990s and 1980s would have ended up offering a much smaller payoff and the whole arc of Chinese growth post-WWII would have been smoother and less dramatic.

On the other hand, conventional wisdom is no fun. My bull case for China would be that for all the rapid catch-up growth the PRC has seen there are still enormous region-to-region gaps. That means that even if Shanghai and the Pearl River Delta have run out of room for further catchup, there’s still enormous scope for interior regions to catch up with the prosperous coasts. We know that existing governance institutions were good enough for coastal China to do a lot of catch up so why shouldn’t they be good enough for the interior to catch up with the coasts?