Sep 13, 2023·edited Sep 13, 2023Liked by Wang Xiangwei
I agree that there's a lot the party could do to boost confidence short of more fiscal stimulus. But current policy continues to tend towards centralisation and national security. While there's been progress on hukou reform in recent months, steps to increase judicial independence, reduce bureaucracy, or tone down the anti-corruption campaign seem unlikely in the current environment. I hope you are correct and that structural reform is being seriously considered, but I think a centrally-led fiscal stimulus program might end up being the less politically painful option for restoring business confidence.
The recent healthcare crackdown is a case in point. I think there's a good chance it's justified — it seems likely that at least some of the massive funds released during zero-Covid were misused at the local level — but it does little to boost business confidence across society. Or take Hong Kong — while the legal system remains fairly impartial for non-political cases, long-term business confidence has been shaken by the broad wording of the NSL and the broader crackdown on civil society.
Of course, there's the possibility that even if official regulations don't change, enforcement will become more relaxed to encourage entrepreneurship. But if this is the strategy I imagine it will take much longer for businesses and investors to regain confidence. And I agree that extending leases would be a smart policy that would not require more spending!
While not bad solutions, they would all have considerable lag effects. It’s been years of heavy handed policy on the private sector. A few months of a gentle touch probably won’t be very convincing. Would a private company want to invest money investing when the policy approach might change on a whim?
I agree that there's a lot the party could do to boost confidence short of more fiscal stimulus. But current policy continues to tend towards centralisation and national security. While there's been progress on hukou reform in recent months, steps to increase judicial independence, reduce bureaucracy, or tone down the anti-corruption campaign seem unlikely in the current environment. I hope you are correct and that structural reform is being seriously considered, but I think a centrally-led fiscal stimulus program might end up being the less politically painful option for restoring business confidence.
The recent healthcare crackdown is a case in point. I think there's a good chance it's justified — it seems likely that at least some of the massive funds released during zero-Covid were misused at the local level — but it does little to boost business confidence across society. Or take Hong Kong — while the legal system remains fairly impartial for non-political cases, long-term business confidence has been shaken by the broad wording of the NSL and the broader crackdown on civil society.
Of course, there's the possibility that even if official regulations don't change, enforcement will become more relaxed to encourage entrepreneurship. But if this is the strategy I imagine it will take much longer for businesses and investors to regain confidence. And I agree that extending leases would be a smart policy that would not require more spending!
Thanks William for your thoughtful comments. much appreciated. Xiangwei.
Excellent piece, very similar to our analysis though with some solid concrete steps. Do you mind if we cross post? Our take: https://austrianchina.substack.com/p/chinas-economy-the-good-the-bad-and-the-ugly-pt1
While not bad solutions, they would all have considerable lag effects. It’s been years of heavy handed policy on the private sector. A few months of a gentle touch probably won’t be very convincing. Would a private company want to invest money investing when the policy approach might change on a whim?
China, not having a famine = party state, confident in the economy. Srsly, they have a very low bar.
You could make one thousand reasons for solving Chinese problems, but one can do nothing other than look up to the Party.