China’s economy in trouble, just when Joe Biden copies the recipe by imitating the industrial policies of Xi Jinping. Today’s data reveals a sharp slowdown of Chinese growth in all sectors: consumption, investments, industrial production, real estate market. Youth unemployment reached a maximum of 20%. The slowdown has pushed the central bank of Beijing to cut interest rates, in contrast to what is happening in the West where monetary authorities increase the cost of money for fight inflation. But these Chinese rate cuts – and the creation of $ 60 billion in new monetary liquidity – risk being insufficient to cure the uncertainty that depresses the world’s second largest economy. The first causes the extension of the restrictions linked to the zero covid health policy, from which Xi Jinping has not wanted to depart so far.
The slowdown in Chinese growth has an immediate impact on the markets for raw material: oil dropped by 5%, returning to the levels of mid-February, ie before the Russian invasion of Ukraine. China is the world’s largest consumer and importer of fossil fuels and almost all other raw materials. In light of the latest data, many analysts are reviewing them downwards GDP growth forecasts at the end of the year, reducing them to around 3%. The official target of the Beijing government remains 5.5% and Xi Jinping for reasons of prestige wants the trend of Chinese GDP to overtake the American one, at least in percentage terms (overtaking in absolute size continues to be postponed). But Xi does not seem willing to launch public spending maneuvers comparable to those that Beijing used to escape the great crisis of 2008. The many speculative bubbles accumulated since then in the Chinese financial system and real estate market; and also the fear of awakening inflation which in turn could trigger social tensions.
A profound connoisseur of the Chinese reality, the former Australian premier Kevin Rudd who today heads the New York think tank Asia Society, argues that the root of the Chinese slowdown is the return of socialism. In particular, starting from 2017, Xi has imposed a shift to the left of its economic policy: the sections of the Communist Party have regained a role in the management of many companies, and several private groups have been forced to include state-owned companies in their shareholder base. This return to the primacy of the Communist Party and of the state, a reverse from the neoliberal era of Deng Xiaoping.
The difficulties of Chinese growth are bound to fuel controversy over the Biden’s economic policy in the United States. In fact, the latest legislative maneuvers launched by the Washington Congress at the instigation of the White House are part of the tendency to copy China to beat it on its own ground – which I analyzed a year ago in my essay Stopping Beijing. With this democratic administration there is also in the United States a return of the public hand in the economy, albeit in a very different context from that of China. The maneuver of subsidies and aid for semiconductors, as well as the Green Deal which will provide loans and subsidies to renewable energies, are part of a reaction against the loss of American technological leadership in some strategic sectors. Biden, supported by a robust current of thought within his party, convinced that to counter the advance of China it is necessary in part to use his own methods, that is to make an industrial policy that favors national champions with state support. Already last year the total of fiscal expenditures in favor of private industry in the United States reached 1,400 billionand Biden’s latest maneuvers will add to it 350 billion.
Criticism is beginning to be heard from the liberal wing of the Republican party: if Xi’s leadership has failed in China, why copy it? The opponents of industrial policy argue that America was the victim of a similar blunder in the 1980s, when the yellow peril was Japan, and a part of the American political elite believed that the competitiveness of Japanese multinationals was a result of government planning of Tokyo. In 1989 the Rising Sun entered a long crisis and the Japanese model pass of fashion.
August 15, 2022, 20:37 – change August 15, 2022 | 20:37
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