Economy

Opinion | Xi Jinping’s vaunted economic model is failing – The Washington Post

Published

1 year ago

September 8, 2023

The East is ascendant. The West is in irreversible decline. And China is proving that its centralized, state-led authoritarian system is superior at delivering high economic growth and rapid development, in contrast to messy and fractious democracies.

For years, and particularly since Chinese President Xi Jinping cemented his power, this has been the official message underpinning Mr. Xi’s “great rejuvenation of the Chinese nation.” Rejuvenation — also called revival — has been repeated like a mantra in official documents and by the state-run media. It carries specific strategic aims: restore China as a global power; double the size of the economy and surpass the United States by 2035; achieve “common prosperity” to erase income inequality. “The superiority of our system will be fully demonstrated through a brighter future,” Mr. Xi proclaimed.

Now, that brighter future appears increasingly in question. After decades of spectacular growth, China’s economy is slowing down — and the country is facing serious economic and demographic challenges. Exports are flagging. Retail sales are lagging. The all-important property market appears to be a bubble in danger of collapsing. More than one-fifth of young people are officially unemployed, and the real number is likely much higher. The country is awash in debt.

Major banks have now cut their forecasts for China’s gross domestic product growth for this year and next. Beijing has conceded it is unlikely to hit its own projected growth targets for this year.

Some of China’s problems are of its own making, the result of misguided policies inflicted by the country’s ruling Communist Party leaders. The demographic imbalance can be traced to the decades-long one-child policy, at times brutally enforced with involuntary abortions and forced sterilizations. Now, China’s population is declining for the first time in more than 60 years, and, faced with a shrinking future workforce, the government is coming up with an array of policy incentives, propaganda campaigns and gimmicks to try to persuade or coerce people to have more children. So far, those efforts have found little success.

India, a rowdy and robust democracy, has already passed China in population this year and is also projected to outpace China in economic growth for 2023.

China’s strict “zero covid” policy was also a factor, cutting off the country from the world for most of three years during the pandemic. After a brief uptick this year when the controls were finally lifted, the economy has still not recovered to its pre-covid levels. International tourism, for example, is just a fraction of its 2019 level.

China’s leaders, enamored of state-run enterprises and paranoid of any rival power centers outside their direct control, also embarked on campaigns to rein in the freewheeling tech sector, the housing market and the lucrative private education and after-school tutoring sector, putting thousands of companies out of business.

Other problems in China are external, particularly the impact of the U.S. trade wars and sanctions hitting the technology and semiconductor sectors of the economy.

Now, rather than showcasing the supposed “superiority” of the Chinese system, the current economic downturn is underscoring the Communist leadership’s unwillingness or inability to respond to the country’s myriad mounting crises. Outside economists and experts say the government should be introducing new stimulus measures, such as infrastructure building, to create jobs and also ease lending conditions for new home buyers. But, so far, the government in Beijing has seemed paralyzed with indecision.

It’s an old trope that authoritarian governments are more efficient, and produced better results for their people, than democracies. In the 1990s, this misguided belief was known as “Asian values” and became an article of faith among many adherents — until it was busted by the 1997 economic crisis. Mr. Xi revived it and took the idea to a new level. Now, it looks to be busted again.

Western democracies, with their fragmentation, polarized politics and endless debate and delay have long been derided as inefficient and ill-suited for tackling big long-standing problems — and one need only to look at the endless debt and spending debates in the United States, or the initial fumbling response to the pandemic with the arguments over mask-wearing and lockdowns. In the United States as well as in Europe, frustration and disaffection with democracy and concern over growing inequalities has led to a rise of populism and an attraction among some to a supposedly superior authoritarian model.

But in the post-covid era, the Western democracies have emerged stronger and some of the authoritarian regimes are struggling.

The world’s other great authoritarian model, Russia under President Vladimir Putin, is floundering economically for very different reasons. After Mr. Putin’s illegal and disastrous invasion of Ukraine, the West came together to impose crippling sanctions. Now, the ruble has plunged to its lowest point in 17 months, inflation is rising and Russia’s once lucrative gas exports to Europe have plummeted. Defense spending is, for now, keeping Russia’s economy propped up.

China and Russia had been trying to lure countries of the Global South to their concept of a new world order, not dominated by Western institutions and the United States, showcasing alternative models to Western-style democracies. Now, the two authoritarian giants are flailing. Let’s hope the world is paying attention.

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Economy

Can anything spark Europe’s economy back to life? – The Economist

Published

1 hour ago

September 9, 2024

Harry Miller

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Can anything spark Europe’s economy back to life? The Economist

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Economy

Mark Carney to lead Liberal economic task force ahead of next election

Published

4 hours ago

September 9, 2024

Anne Joseph

NANAIMO, B.C. – Former Bank of Canada governor Mark Carney will chair a Liberal task force on economic growth, the party announced Monday as Liberal MPs meet to strategize for the upcoming election year.

Long touted as a possible leadership successor to Prime Minister Justin Trudeau, Carney was already scheduled to address caucus as part of the retreat in Nanaimo, B.C., this week.

The Liberals say he will help shape the party’s policies for the next election, and will report to Trudeau and the Liberal platform committee.

“As chair of the Leader’s Task Force on Economic Growth, Mark’s unique ideas and perspectives will play a vital role in shaping the next steps in our plan to continue to grow our economy and strengthen the middle class, and to urgently seize new opportunities for Canadian jobs and prosperity in a fast-changing world,” Trudeau said in a statement Monday.

Trudeau is expected to address Liberal members of Parliament later this week. It will be the first time he faces them as a group since MPs left Ottawa in the spring.

Still stinging from a devastating byelection loss earlier this summer, the caucus is now also reeling from news that its national campaign director has resigned and the party can no longer count on the NDP to stave off an early election.

Last week, NDP Leader Jagmeet Singh ended his agreement with Trudeau to have the New Democrats support the government on key votes in exchange for movement on priorities such as dental care.

All of this comes as the Liberals remain well behind the Conservatives in the polls despite efforts to refocus on issues like housing and affordability.

Some Liberal MPs hope to hear more about how Trudeau plans to win Canadians back when he addresses his team this week.

Carney appears to be part of that plan, attempting to bring some economic heft to a government that has struggled to resonate with voters who are struggling with inflation and soaring housing costs.

Trudeau said several weeks ago that he has long tried to coax Carney to join his government. The economist and former investment banker spent five years as the governor of the Bank of Canada during the last Conservative government before hopping across the pond to head up the Bank of England for seven years.

Carney is just one of a host of names suggested as possible successors to Trudeau, who has insisted he will lead the party into the next election despite simmering calls for him to step aside.

Those calls reached a new intensity earlier this summer when the Conservatives won a longtime Liberal stronghold in a major byelection upset in Toronto—St. Paul’s.

But Trudeau held fast to his decision to stay and rejected calls to convene his entire caucus over the summer to respond to their concerns about their collective prospects.

The prime minister has spoken with Liberal MPs one-on-one over the last few months and attended several regional meetings ahead of the Nanaimo retreat, including Ontario and Quebec, which together account for 70 per cent of the caucus.

While several Liberals who don’t feel comfortable speaking publicly say the meetings were positive, the party leader has mainly held to his message that he is simply focused on “delivering for Canadians.”

Conservative House leader Andrew Scheer was in Nanaimo ahead of the meeting to express his scorn for the Liberal strategy session, and for Carney’s involvement.

“It doesn’t matter what happens in this retreat, doesn’t matter what kinds of (communications) exercise they go through, or what kind of speculation they all entertain about who might lead them in the next election,” said Scheer, who called a small press conference on the Nanaimo harbourfront Monday.

“It’s the same failed Liberal policies causing the same hardships for Canadians.”

He said Carney and Trudeau are “basically the same people,” and that Carney has supported Liberal policies, including the carbon tax.

The three-day retreat is expected to include breakout meetings for the Indigenous, rural and women’s caucuses before the full group convenes later this week.

This report by The Canadian Press was first published Sept. 9, 2024.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

Published

3 days ago

September 6, 2024

Anne Joseph

TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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