Thus does le capitalisme dirigiste hit the wall. CNBC reports that China’s economic growth edged down to 6.9 percent in the final quarter of 2015 as trade and consumer spending weakened, dragging full-year growth to its lowest in 25 years. Since virtually no self-respecting Western economist or business forecaster believes any official Chinese government-issued economic data, it’s a fair bet that China’s real growth rate is much, much lower than that.
Only a few years ago, foreign money flooded into China as one of the so-called emerging market economies, along with Turkey (which The Sparkspread addressed recently), Brazil, and a few other countries. Commodity prices boomed along with the China boom, although the China boom itself was a debt-fueled spree enabled by China’s banks — under state direction, of course. It made the 1980’s LBO boom in the US look like a sedate tea party. For example: China manufactured more cement between 2010 and 2013 than the United States produced during the entire 20th century.
That is mind-boggling. But the party has to run out of booze at some point, or else the guests reach the point where they lie insensible on the floor, unable to imbibe one more drop.
China’s banks funded all of the booze and buffet tables with huge loans, most of which will never be paid back. The “lackluster” 6.9% growth rate reflects in part the exhaustion of the country’s banks. How can they continue to lend the vast sums needed to prop up China’s exorbitant growth rates? The short answer is, they can’t. When China reports a 6.9% growth rate, it’s more likely that the country’s real growth growth rate is stuck at mid-1970’s levels, back when Mao Tse Tung held the reins.
This is coupled with something of a national identity crisis. What does it mean to be China in the world of the 21st century? It is building artificial islands in international waters and claiming that such construction makes them Chinese territorial waters. It has one aircraft carrier and wants a few more. Its economy did grow by leaps and bounds, every year, for the last few decades. But how does China reconcile all that money and muscle-flexing with its traditional victimology? True, China was a victim of past aggression, whether from the West in the 19th and early 20th centuries, or from Japan between 1931 through the end of WWII. But its recent and remarkable progress imports assumption of a greater responsibility for constructive leadership in the world. Whether the country lives up to that responsibility remains to be seen. It certainly won’t happen without internal stability. The legitimacy of China’s Communist Party rule depends in large measure on a continued impressive growth rate, and that is by no means a sure thing.
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