The Big Ideas

by Malcolm Riddell

'Meet the New Chinese Economy, Same as the Old Chinese Economy'

The Wall Street Journal

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Mike Bird | The Wall Street Journal
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June 17, 2021
'Meet the New Chinese Economy, Same as the Old Chinese Economy'
'Meet the New Chinese Economy, Same as the Old Chinese Economy'
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Mike Bird | The Wall Street Journal

BIG IDEA | ‘If a recovery led by investment in real estate and industrial production, with consumption lagging behind, sounds familiar, it may be because the same could be said of the makeup of China’s growth before Covid-19.’

‘The moving parts in China’s latest growth figures are very similar to those in place before the pandemic.’

  • ‘Firing up the old industrial model helped the country return to 2019 levels of output while the global economy was still depressed, but it also shows off long-festering fragilities.’

‘Chinese economic data for May came in slightly weaker than economists expected, but still seem strong by Western standards. It is best to compare the numbers released on Wednesday to their equivalents from 2019 for a clear picture, since those aren’t distorted by the extremely unusual economic conditions of early 2020.’

  • ‘Industrial production is up 13.6% for the first five months of the year, compared with the same period in 2019.’
  • ‘On the same basis, retail sales have risen by 9.3%, fixed-asset investment by 8.5%, and real-estate investment by 17.9%.’

‘If a recovery led by investment in real estate and industrial production, with consumption lagging behind, sounds familiar, it may be because the same could be said of the makeup of China’s growth before Covid-19.’

‘Unlike the U.S., where there are many questions around how the huge stimulus might change the shape of the economy, China has followed a well-established script in its pandemic response.’

‘Even the lagging retail-growth figures may exaggerate the underlying strength of the consumer economy relative to previous years.’

  • ‘Before the pandemic China typically ran a large travel deficit in its balance of payments, meaning that Chinese travelers spend more outside of the country than visitors to China spend domestically.’
  • ‘With the pandemic limiting foreign travel, some portion of that consumption now likely happens at home. That could be true for some time, but presumably won’t be forever.’

‘Two concerns with the shape of the recovery are immediately noteworthy.’

‘The first, as Julian Evans-Pritchard at Capital Economics points out, is that growth in industrial-export sales has slowed.’

  • ‘Since the industrial expansion has been driven in large part by exports, a slowdown even from very rapid growth levels might have a material impact.’

‘The second is what precisely is fueling real-estate investment.’

  • ‘Buyer deposits are up by almost 42% relative to their level in the first five months of 2019, and have become the dominant source of developer funding.’
  • ‘Buyers are now the main creditors to the country’s fragile real-estate industry, although they may not be entirely aware of it.’
  • ‘Any disruption there could have financial implications, and even the potential to create a significant social shock too.’

‘China’s recovery has been impressive, but the pandemic hasn’t changed the structural flaws that most concerned economists before Covid-19—and may even have compounded them.’

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Malcolm Riddell
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'Are you tired of losing yet, America?'

As I write this, Taliban forces have entered Kabul and are reportedly occupying the Presidential Palace.
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Bloomberg

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'China Signals More Regulation for Businesses in Coming Years'

‘The State Council’s statement provides a guiding context to interpret current regulatory thrusts. The blueprint as an attempt by Chinese authorities to help investors understand the motives behind the regulatory push.’
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The Wall Street Journal

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George Soros
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'Xi’s Dictatorship Threatens the Chinese State'

‘Mr. Xi is determined to bring the creators of wealth under the control of the one-party state.’
8/15/2021

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Malcolm Riddell
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Don't Say Xi Jinping Didn't Warn You

‘Global investors are shocked to have discovered that China is run by Communists.’
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Bloomberg

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Matthew Brooker | Bloomberg
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‘Global investors shocked to have discovered that China is run by Communists.’

‘Global investors are shocked to have discovered that China is run by Communists.’
8/5/2021

Bloomberg

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'Shocked Investors Scour Xi’s Old Speeches to Find Next Target'

‘While China’s policy moves can feel ad hoc particularly to foreign investors, the changes are quite targeted on certain sectors.’
8/5/2021

The Wall Street Journal

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Greg Ip | The Wall Street Journal
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'China Wants Manufacturing—Not the Internet—to Lead the Economy'

‘Social media, e-commerce and other consumer internet companies are nice to have. But in his view national greatness doesn’t depend on having the world’s finest group chats or ride-sharing.’
8/5/2021

Bloomberg

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'China Plans to Exempt H.K. IPOs From Cybersecurity Reviews'

‘China plans to exempt companies going public in Hong Kong from first seeking the approval of the country’s cybersecurity regulator, removing one hurdle for businesses that list in the Asian financial hub instead of the U.S.’
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The Wall Street Journal

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The Editorial Board | The Wall Street Journal
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'Biden’s Warning on Hong Kong'

‘The pretense of Chinese and Hong Kong authorities is that their crackdown on the rule of law and dissent will have no effect on Hong Kong’s viability as an international center for trade and finance.’
7/18/2021

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Malcolm Riddell
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Why the U.S. Lacks Leverage over China

During the celebration of the Chinese Communist Party’s Centennial celebration, Mr. Xi stood in the same place on the balcony facing Tiananmen Square where Mao Zedong stood when he announced the founding of the PRC; Mr. Xi wore a gray Mao suit, among a sea of blue western suits; and he centered himself right above the portrait of Mao, who is similarly attired.
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Foreign Affairs

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Kurt Tong | Asia Group
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Hong Kong and the Limits of Decoupling

‘The United States’ inability to make China regret—much less reverse—its transgressions in Hong Kong suggests that financial separation, sanctions, and economic barriers are less reliable tools than many in Washington believe.’
7/18/2021

Nikkei Asia

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'I will aim for Mao's Status.'

‘There on the gate was Xi Jinping, Chinese president and party general secretary, in a gray Mao suit. Just below his feet was the portrait of Mao Zedong, also dressed in a gray Mao suit.’
7/18/2021

Financial Times

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'US warns companies of risk of doing business in Hong Kong'

“In the face of Beijing’s decisions over the past year that have stifled the democratic aspirations of people in Hong Kong, we are taking action,” said Antony Blinken, US secretary of state. “Today we send a clear message that the US resolutely stands with Hong Kongers.”
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Malcolm Riddell
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The Chinese Point of View

Here are a few of my thoughts on the importance of Wang Jisi’s ‘The Plot Against China.’ Yuen Yuen Ang’s ‘The Evolution of Chinese Corruption’ speaks for itself - but note especially how Mr. Xi's anti-corruption campaign could hurt China's economy. I have now lived long enough that when a friend complains about his or her spouse, I say to myself, ‘There are no doubt two sides to this story.’
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Foreign Affairs

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Wang Jisi | President of the Institute of International and Strategic Studies at Peking University
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'How Beijing Sees U.S.-China Relations'

‘In Chinese eyes, the most significant threat to China’s sovereignty and national security has long been U.S. interference in its internal affairs aimed at changing the country’s political system and undermining the CCP.’
7/4/2021

Foreign Affairs

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Yuen Yuen Ang | University of Michigan
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'How Corruption Powers China's Economy'

‘China has managed to sustain four decades of economic growth despite levels of corruption that even Xi has described as “grave” and “shocking.” Why does it seem to have bucked the trend?’
7/4/2021

Harvard Magazine

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Ed Steinfeld | Brown University
Tony Saich
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Harvard Kennedy School of Government
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'From Rebel to Ruler': Tony Saich on Chinese Communism at 100

‘At so many points during its century-long existence, the CCP appeared to be in its death throes, whether as a result of external attack or self-inflicted internal strife.’
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