yeah as much as i hate to say it the past couple of years have kind of vindicated some of my fears about china’s path (i.e. reform and opening up). ive never doubted the huge success it’s had economically but purposefully allowing capital to grow in a market environment even checked by the power of a communist party is a very real danger imo and im very worried they’re not going to stick the landing these days. this is honestly is a perfect opportunity to begin the transition back to a fully planned economy by letting these companies cannibalize each other and themselves then they could swoop in and nationalize and instead they’ve got the people’s daily putting out this garbage. alongside wasting the opportunity for quick dedollarization + the seeming complete capture of chinese economists by western economic woo woo (according to xhs at least), i’m more concerned than ever that the CPC will completely succumb to capital.

tbc not everything is bad news out of china on this front, if it’s true for instance that they’re restricting who is allowed into the CPC based on ideological rigor more than before, but even still any results from that would take decades to bear out. I think whoever succeeds President Xi will be very telling though (gotta be within the next decade or so right? the man’s 72)

How is “excess competition” distorting the market mechanisms? It IS the market mechanisms. External controls to curb this would be the actual distortion of market forces.

Government regulations “distort” market mechanisms if you think that “pure” market mechanisms are those that are fully anarchic in nature.

If you approach things from a keynesian ideology (which is fairly popular in China), then market mechanisms exist to balance supply and demand, while providing incentive for innovation by firms.

In this case then, yes, the market mechanisms are not working properly. So you fix them using government intervention.

You should remember, in keynesian theory, the government and markets are supposed to support each other.

Unfortunately I don’t see us going back that route. The Mao central planning era is viewed with disdain by the current generation of policymakers now that China has grown spectacularly under the reform policies. Also don’t forget that most of the current generation of leadership were victims of the Cultural Revolution, and the old school conservatives (who want to return to Mao’s planning era) have been purged in the 1990s.

I think there should be a shift back towards more centralization especially after the recklessness of the local governments and the ineptness of the central government to rein them in, but we’ll see.

It is curious that the Chinese state is willing to pursue many forms of macroeconomic policy but seems to avoid some of the more basic socialist policies like working rights and wages.
Is this some neoliberal erosion of imagination and class struggle in the CPC or is there some justification from their part? Is that justification one that holds up to scrutiny?

This is a natural consequence of private property and the profit motive’s presence in an economy.

Hell, if homes are ‘for living, not for speculation’, then the PRC should do what the USSR (and, I’m pretty sure, pre-liberalisation PRC) did - provide guaranteed housing. That is, however, not possible unless and until the PRC adopts planned economy again.

The problem goes way deeper than a simple “Chinese is socialist or not” and we can write entire essays about that.

But here are some points to consider:

First, the Chinese governance after Mao is highly decentralized, and this has been especially the case since the 1994 Tax Sharing Reform that gave the local governments the authority of land financing. The central government controls the behavior of the local/provincial governments by setting the criteria for their promotion (e.g. the most important KPI is GDP growth, which is why you see so much obsession with the GDP growth numbers in China).

Second, the entire leadership believes in the IMF doctrine. This means export-led growth, and keeping wages low to maintain export competitiveness. China has the natural advantage of a huge labor pool, and was able to exploit it to destroy the competitiveness of its competitors after joining the WTO in 2001.

Third, after the 2008 global financial crisis, the local governments found a “cheat code” to keep GDP growth up - land leasing. This came at the right time as the central government promoted the 4 trillion yuan stimulus to boost the economy through infrastructure building. By forming a pact with property developers and local banking institutions (through shadow banks before 2015), local governments took out huge loans for infrastructure building to bid up the land price.

The problem here is that such massive infrastructure building phase was not centrally planned, or at least they weren’t planned well. Every local government competed with one another to entice the property developers and financial institutions, and eventually this turned into a proliferation of thousands of “ghost cities” - a massive oversupply of housing - that will never be occupied. It’s raising GDP for the sake of raising GDP. Many local officials received the career promotion of their lifetime simply by managing to jack up the GDP numbers.

We now end up with very nice looking villages and provincial towns, good infrastructure, but no jobs. Young people leaving for the big cities to look for employment and participate in the competition to the already intense neijuan (extreme competition) environment.

The recklessness of the local governments precipitated in the inevitable collapse of the property sector. However, at this point, it is too deeply intertwined land financing. Nearly 35% of local government revenues still come from land leasing, and you can imagine what a huge loss of the income (and hence the operating budget) with the fall in property prices.

So now they are betting on EV and solar panels (where green tech has been listed as a priority in the 13th Five Year Plan) and more recently, robotics and AI. Huge amount of investment have been poured into it by the local governments, making bets to recover their losses from the plunging land price. It’s one gamble after the other.

As the manufacturers receive massive subsidies from the local governments (because of competition, where each government wants the manufacturer to open their plants in their province), they become industries that are “too big to fail”. This is why even though the entire solar panel sector has been making heavy losses, you still don’t see bankruptcies coming out of the supply chain (yet). An inordinate amount of wealth continues to be poured into these industries to keep them from failing, because otherwise the local governments will take on even heavier losses as their investments go burst.

Add to the fact that the most important tax revenue is the value-added tax, they have to keep these industries alive by whatever means necessary. Now imagine where all these wealth come from to prop up these sectors? All those wealth could have gone into investing into giving welfare to the people.

Paradoxically, this means the wealth inequality grows, and the consumption (purchasing power) of the working people is reduced at the expense of even more investment to the manufacturing sector. As a result, domestic consumption falls, and the reliance on export grows so they can actually sell the goods are now in over-supply. If not, then the production will have to scale back, unemployment grows, and we get recession. Interesting, isn’t it? It’s one big circle back to relying on export-led growth once again.

We can keep going and this is really just a stream of consciousness of writing, but I hope you can see that the inability of the central government to rein in the recklessness of the local governments, the central leadership’s own belief in the IMF neoliberal framework, and the over-investment in sectors that are so deeply intertwined with the local government debt and the financial sector that it is now a very complex web of problems to disentangle.

Yes I have made it very clear before that the consumption problem is merely a symptom.

The elephant in the room that the Chinese government has yet to (and refuse to) admit is the growing wealth inequality over the past two decades.

This is why I have also said that the government cannot simply subsidize its way out of this problem. No amount of macro/micro policy adjustments can solve that. It can only be done by resolving the fundamental issue of wealth inequality.

In addendun due to space, just so people don`t misunderstand, there are Chinese based, Marxist critiques of these reforms you can find online.

Here is one such critique.

Yu Yongding Defends Investment-Led Growth, Dismisses Consumption-Driven Model - Influential Chinese policy advisor questions effectiveness of consumer subsidies, pushes for renewed infrastructure stimulus

1. “Consumption-Driven” Growth Doesn’t Exist

The concept of “consumption-driven” growth is most frequently discussed by American economists like Krugman and Summers. Krugman claims that China’s long-standing “investment-driven” growth model has brought the Chinese economy to the brink of financial crisis, while Summers argues that China’s “investment-driven” growth model has reached its end.

When discussing the choice between “investment-driven” and “consumption-driven” growth, we must first clarify whether we’re discussing long-term economic growth or short-term macroeconomic management. When Western academics discuss China’s “investment-driven” model, they’re actually referring to China’s economic growth strategy and paradigm. How to achieve China’s long-term stable growth (development) is fundamentally different from how to achieve a specific growth target in a given year, such as achieving around 5% GDP growth in 2025. The former focuses on medium and long-term economic growth, studying supply-side issues; the latter emphasizes short-term adjustment, studying demand-side issues.

As a matter of long-term economic growth, “consumption-driven” growth simply doesn’t exist as an economic growth model.

Taking Marxist reproduction theory as an example, when all savings are converted into investment, the higher the savings rate, the faster the growth of total social product. Conversely, the higher the “consumption rate,” the lower the growth rate of total social product.

Taking Lenin’s reproduction theory as an example, at age 23, Lenin engaged in a polemic with the Narodniks in an article titled “On the Question of Markets,” constructing what was essentially a growth model using difference equations. Lenin used this model to prove that despite Russia’s poverty and insufficient consumption—with the second department (producing consumer goods) unable to develop—the first department (producing means of production) could grow independently of the second department’s slow growth due to the continuous increase in organic composition. Therefore, Russia would inevitably enter capitalist society, making socialist revolution inevitable.

Currently, the Chinese government strongly emphasizes industrial and product innovation, placing technological progress’s role in driving economic growth in a prominent position. In this context, one could say China faces a choice between “investment-driven” and “technology-driven” growth, but technological progress doesn’t fall from the sky—it cannot be separated from various forms of investment. Therefore, one could also say China faces a choice between “general investment-driven” and “innovation-focused investment-driven” growth.

The production function can be expanded to include factors like institutional change and human capital. Improvements in human capital are related to education, health, and other factors. If consumption has a pulling effect on economic growth, this effect should be realized through human capital improvement. However, the transmission mechanism of consumption→human capital improvement→economic growth requires specific quantitative research; conclusions cannot be drawn simply. Moreover, consumption that can improve human capital is of specific types, and the provision of such consumption is inseparable from traditional investment.

In summary, for policymakers, economic growth’s dependence on investment, labor input, and technological progress varies in different periods due to different conditions. Growth models in different periods can be labeled as “investment-driven,” “labor-driven,” or “technology-driven.” But regardless, there is no such thing as a “consumption-driven” economic growth model or strategy.

3. Is China’s Consumption Rate Too Low? Actually, Goods Consumption Rate May Exceed the US

From the perspective of consumer goods expenditure as a share of GDP, China significantly exceeds the US. In 2022, China’s GDP was about 70% of US GDP; retail sales were 87.4% of US goods consumption (including dining). In other words, from the perspective of owning consumer goods (cars, TVs, air conditioners, etc.), China’s consumption expenditure as a share of GDP significantly exceeds the US. Additionally, there are many statistical scope and methodological issues that tend to underestimate China’s final consumption as a share of GDP.

Therefore, after considering consumption structure and price differences, the gap in consumption expenditure as a share of GDP between China and the US shown statistically is actually far less significant than the data suggests. Rough estimates show that measured by goods consumption as a share of GDP, China is about 1.25 times the US.

This is consistent with what Michael Roberts had documented in the past, China’s unfair ‘overcapacity’

The rationality of this nonsense is to be found in the Western mainstream view that China is stuck in an old model of investment-led export manufacturing and needs to ‘rebalance’ towards a consumer-led domestic economy where the private sector has a free rein. China’s weak consumer sector is forcing it to try and export manufacturing ‘over capacity’.

But the evidence for this is not there. According to a recent study by Richard Baldwin, he finds that the export-led model did operate up to 2006, but since then domestic sales have boomed, so that the exports to GDP ratio has actually fallen. “Chinese consumption of Chinese manufactured goods has grown faster than Chinese production for almost two decades. Far from being unable to absorb the production, Chinese domestic consumption of made-in-China goods has grown MUCH faster than the output of China’s manufacturing sector.”

The successful economy wants to become financialized. Holy shit Arrighi is spinning in his grave.

Zhang Weiying is Austrian school people lol. They love this free market shit.

Comrade, what is this nonsense? Don’t know Marx advocated that the Spectre of Communism( ) would guide the market, and only by liberalizing all industry and embracing free market economics can true communism ever be reached? /s

Well they are “working on it” lol. We’ll see what new policies they announce in the coming months.

Funny you classify me as a doomer when I have been one of the very few people on this site that actually says that China is already economically and financially resilient enough to take on the US empire.

The people who keep making excuses for China’s liberal policies “but China is too weak yet… it needs to build up its productive capacity first…” and my favorite “China is playing the LONG GAME don’t you know” are the ones who are dooming lol.