China’s Economics of Denial: Beijing’s Theory of Success in the Face of Failure
Foreign Affairs · Oliver Melton and Logan Wright ·
Beijing’s theory of success in the face of failure.
China has correctly diagnosed its most pressing economic problems. The Chinese Communist Party has acknowledged that its economy relies too much on investment and exports and that persistently weak household consumption is the core threat to future growth. The leadership also knows that this imbalanced growth model is causing trade friction with developed and emerging economies alike and will continue to do so. They know there is a growing chorus of economists (including many quiet voices in China) raising the alarm that, if Beijing does not make major changes soon, China will face ever-slower growth, cascading trade disputes, and potentially stagnating household income.
But what is puzzling is that the country’s leaders are not acting. Beijing has announced only modest plans to boost household consumption and domestic demand, and its overall economic strategy remains essentially unchanged—focused on expanding investment in manufacturing, especially in advanced technologies and new strategic industries.
Theories abound as to why Beijing has chosen to ignore the warnings. Many speculate that Chinese leader Xi Jinping is not receiving accurate information or that he and his closest allies have abandoned development as a priority in favor of national security goals or a desire to control the commanding heights of global industry. Others argue that Beijing knows what it should do, but political or institutional constraints prevent it from taking decisive action.
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