For some time now, readers have been fed a steady diet of comments pointing out China’s economic decline. To use just one example, Washington Post Columnist Catherine Rampell recently wrote that China’s economy was going through “tough times.” Rampell is not alone. At the time of his chronicle, the Job brought together a number of contributors to reflect on the Why behind China’s economic difficulties.
Does it hurt? As this column always shyly admits, it would be very difficult to measure the “GDP” of a street, let alone a vast country. Furthermore, economies are not objects whose temperature can be taken, they are people. The assumption here is that measures of Chinese economic health are as misleading as they are in the United States. The economies of the United States and China are far too dynamic to be followed by the kind of vain people who claim to measure them.
At the same time, it should be noted that US stock indices have not undergone a significant correction. Non sequitur? No way. China is a huge market for American companies. Readers saw this recently with Apple’s $200 billion AAPL market cap loss that took place after Chinese authorities threatened to simply ban the sale of iPhones. Apple sells lots of iPhones there, only for investors to express their nervousness. Apple is not alone. If the Chinese economy weakens, we will see it very clearly through the weakness of US stocks.
Which raises an obvious question: If China’s economy is so weak, why doesn’t it show up in stock indexes? Why indeed. Perhaps the answer lies with Xi Jinping, the same man many American experts point to as the source of China’s so-called economic malaise.
According to a recent report from Wall Street Journal, Xi’s considerable power is “delaying the country’s response to its worst economic downturn in years.” While “officials in charge of day-to-day economic affairs have held increasingly urgent meetings in recent months to discuss ways to address the deteriorating outlook,” Xi has apparently been content to do nothing. In the words of Newspaper According to journalists Lingling Wei and Stella Yifan Xie, Xi “does not seem interested in supporting more stimulus” despite “advice from China’s top economists to take bolder steps.” Xi is the wise one.
Better yet, if Benjamin Anderson were here, he would applaud Xi’s lack of activity. In his brilliant work on the 1930s, Economy and public welfare, Anderson made clear that the “Great Depression” was only “great” because, in response to a weak economy, the political class assumed the power to fix it. There was your depression.
Economists and politicians in the United States then, and in China today, have lost sight of the fact that a “recession” is a sign of an economy in decline. recovery As bad investments are shelved, poorly placed employees are let go so they can find work that suits them better elsewhere, and this is usually the time when mistakes are quickly corrected. Fighting the “recession” means fighting the recovery. Rather than letting individuals and businesses fix themselves, “stimulus” allows bad ideas to fester. Without politicians “doing something” in the 1930s, there would be no Great Depression. This is simply a boom, just as there was when President Harding did nothing to respond to the much larger recession of 1920-21. Doing nothing is the author of the Roaring Twenties. Get it?
By doing nothing now, Xi ideally allows the Chinese to correct their mistakes and for well-run companies to acquire physical and human capital relatively cheaply. All of this suggests the possibility that Xi knows much more than economists about the reasons for economic growth. Besides, so do the stock markets.
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