I think interviewing Dan Wang has made me want to write more about China’s economy, so here’s the first in a short series of posts.
Over the past two years I’ve written a lot of criticism of China’s economic policies. There were basically two reasons for that: First, China really did make a bunch of policy blunders during that time, and second, there was a narrative of Chinese economic infallibility in the late 2010s that needed correcting. Now I think that correction has largely been accomplished, and I see the possibility of an opposite narrative of Chinese economic incompetence taking hold. That would also be a mistake. The truth is that China has some serious weaknesses but also some amazing strengths, and we need to pay attention to both.
In fact, I think they’re connected. In his book China’s Economy: What Everyone Needs to Know (which is excellent and which I heavily recommend), Arthur Kroeber offers a grand unified theory of the country’s economy — that it’s good at rapidly and effectively mobilizing lots of resources, but bad at using those resources in an optimally efficient way. So in the case of say, building too many apartments, or failed Belt and Road projects, or wasteful corporate subsidies, the lack of efficiency can really bite. But if we’re talking about building the world’s biggest high-speed rail system, or creating a world-beating car industry from scratch, or building massive amounts of green energy, then China’s resource-mobilizing approach can accomplish things on a scale no other country has ever accomplished before.