When ideology gets in the way of the obvious solutions.
The narrative about China has changed with stunning speed, from unstoppable juggernaut to pitiful, helpless giant. How did that happen?
My sense is that much writing about China puts too much weight on recent events and policy. Yes, Xi Jinping is an erratic leader. But China’s economic problems have been building for a long time. And while Xi’s failure to address these problems adequately no doubt reflects his personal limitations, it also reflects some deep ideological biases within China’s ruling party.
Let’s start with the long-run perspective.
For three decades, after Deng Xiaoping took power in 1978 and introduced market-based reforms, China experienced an enormous surge, with real gross domestic product increasing more than sevenfold. This surge was, to be fair, only possible because China started out technologically backward and could rapidly increase productivity by adopting technologies already developed abroad. But the speed of China’s convergence was extraordinary.
Since the late 2000s, however, China seems to have lost a lot of its dynamism. The International Monetary Fund estimates that total factor productivity — a measure of the efficiency with which resources are used — has grown only half as fast since 2008 as it did in the decade before. You should take such estimates with large handfuls of salt, but there has been a clear slowdown in the rate of technological progress.
And China no longer has the demography to support torrid growth: Its working-age population topped out around 2015 and has been declining since.
Many analysts attribute China’s loss of dynamism to Xi, who took power in 2012 and has been consistently more hostile to private enterprise than his predecessors.
