Book Review: “Avoiding the Fall: China's Economic Restructuring” by Michael Pettis

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How is the Chinese economy doing? 

Coming up with no straight answer to this straight question, the Global Times (环球时报) keeps talking about a 2020 sequel to the 4-trillion-RMB stimulus drama of 2008:

“…if the economy is hit too hard by…the coronavirus outbreak, it may be necessary to consider…a large-scale stimulus plan…”(March 2nd, 2020) 

In other words, old wine in a new bottle is on the table. Once again the Chinese people will be asked to get drunk on a unicorn flying over a rainbow in a debt bubble. 

Kicking its propaganda machine into high gear, Beijing directs, or attempts to direct, people to throw reality out of the window and give the CCP’s top guy three cheers. 

Of course, people are also supposed to forget about Wuhan and get back to work no matter what. 

Meanwhile, NASA satellite images show that airborne nitrogen dioxide (pollutant) decreases significantly over China. Take a deep breath?

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When his book came out in 2013 the author didn’t foresee a sudden stop of the Chinese economy due to a virus outbreak. Who can blame him? To his credit, though, he has warned about a slow-motion train wreck otherwise known as the China model.

Truth be told, the GDP growth rates China dreamers brag about come as no surprise to the emerging market economies or accomplished economists.

Robert Aliber, famous for his Andy Warhol Theory of Economic Growth, debunks China dreamers’ inflated claim for economic success with this tongue-in-cheek remark: “In the future every country will grow rapidly for fifteen years.”

Interestingly, when it comes to the standard of living, measured by GDP per capita, China dreamers strut no more.

Today the China dream is still a modest dream of a modest living standard, the attainment of which is not a done deal yet.

Needless to say, a decent social safety net remains unavailable to most Mainland Chinese (while it is already taken for granted among all Taiwanese and Hongkongers).

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As for economic prescription, the author rightly focuses on wealth transfer from the People’s Bank of China to the people of China, which will pave the way for a consumer society. 

A consumer society promotes a higher standard of living and a lower degree of state control. Consumers may not always be right but they always have bargaining power.

Too bad that the author stops short of explaining why it is so hard for Beijing to walk the walk, after pledging to bring about a consumer society.

Here’s my take: Beijing is on the horns of a dilemma.

On the one hand, jolted by the 2008 global meltdown that severely depressed demand, Beijing painfully realized that it might have to cut export-oriented production and face a nationwide revolt of the jobless. Only a consumer society can wean itself from export-dependence.

On the other hand a consumer society implies that people would have a bigger say in wealth redistribution. To put more money and therefore more power in the hands of the people is to put the CCP dictatorship in jeopardy.

Failing to square the circle, Beijing just keeps talking out of both sides of its mouth, never mind that the economy has flatlined.

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In Chinese history a sick economy, a sick central government, mounting foreign pressure, and force majeure would coalesce with each other and grow a dynastic cancer. I don’t see how the CCP dynasty can fix it.

Well, if you can’t fix it, at least you can mask it (no pun intended). 

Xi Jinping masks his weakness by acting like a Khan of Heaven (天可汗), projecting his shadow over everything, everywhere. But the disrobing emperor (宽衣帝) can hardly hide the naked truth that he’s looking over a cliff, with lemmings behind him.

Under the circumstances Xi, an avowed atheist, might actually need someone to throw him a Hail Mary. Speaking of which, who threw him that big fat book titled “A Battle Against Epidemic”(大国战疫)? Just asking.

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Seriously, economy is political economy, as Adam Smith realized and recognized long before everyone else. 

A friendly reminder to the author: For China, economic restructuring is political restructuring. 

Politics may not be on the side of the Chinese people, but time is not on the side of the CCP, either. 

——Lingyang Jiang