Will China’s Next Stimulus Plan Stop the Downward Economic Spiral?
Beijing’s latest plan for capital infusion may be not even be a temporary fix for a long-term problem.
Commentary
Is the Chinese economy really bouncing back?
According to the Chinese Communist Party (CCP), China’s economy is actually performing reasonably well and steadily improving.
Are Happy Times Back?
In his speech at a Dec. 11–12 conference, Xi Jinping claimed that “the economy is stable and making progress and that main economic and social development goals … are about to be successfully completed.”
Imagine the relief that the entire country must have felt after hearing the leader of the CCP confidently declare the economy’s health. By the sound of it, the economy is well on its way, if not on the very threshold, of reaching its long-term goals of a greater, more economically vibrant, fair, and prosperous China for everyone.
And yet, more stimulus is on the way.
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What’s really going on?
Xi’s Words Contradict Reality—And His Actions
Are the “main economic and social development goals” truly about to be completed?
Is the “stable economy” driving the nation toward those lofty goals, as Xi claims?
The answer to those questions is, in a word, “No.”
Is China Turning Japanese?
More than a few observers have noted that China’s economy is showing similarities to Japan’s of the early 21st century, and they’re not wrong. The comparison is worth noting.
For example, key problems that led the Japanese economy into two decades of malaise and stagnation were, and remain, cratering demographics, a high public debt burden, crashing asset prices, particularly in real estate, reliance on foreign demand, and deflation.
These and other reasons—including lack of freedom and expanding Party control over the economy—are why China’s economy has problems sustaining itself and generating long-term growth and stability.
Waving the Stimulus Wand Again and Again
Of course, the CCP relies on more capital infusions to rescue China’s economy. It’s not the first time the Chinese authorities have waved the stimulus magic wand to inject billions’ worth of “new money” into the economy, lowering interest rates and other stimulus measures. They’ve been doing so for the past decade or longer.
Both history and the present are crystal clear: it won’t work. Stimulus, it turns out, is much less stimulating than its namesake implies when it’s over-used.
High Consumer Confidence Is Key to Growth, Stability
In other words, for the Chinese economy to truly grow and succeed over the long term, economic and political reform is necessary for consumer confidence to rise. Higher consumer confidence leads to greater demand and higher spending, which grows the economy. That’s basic macroeconomics.
However, as Zhang noted above, to raise consumer confidence over the long term, the Party will need to make fundamental changes to the economy. That would require transforming China from a Party-dominated, command economy into a dynamic, growth-oriented economy driven by domestic consumption, innovation, and a growing middle class.
CCP Demands More of the Same Policies
A recent proposal called “Promoting the Private Economy,” which is intended to stimulate business growth in the private sector, demands that private companies must “uphold the leadership of the Communist Party of China, adhere to the socialist system with Chinese characteristics, and actively participate in building a strong, modern socialist country.”
Furthermore, businesses must “accept government and social supervision when engaging in production and operations.”
In other words, the proposal simply includes more of the same policies and Party control that caused the problems in the first place. Clearly, when it comes to reform, the CCP talks the talk but can’t walk the walk. China’s state-planned economy will remain structurally unchanged.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
