Monday, 2 October 2023

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Xi’s economic policies are leaving many China watchers bewildered

Xi's economic policies are leaving many China watchers bewildered

Chinese President Xi Jinping speaks at the podium during the meeting between members of the standing committee of the Political Bureau of the 20th CPC Central Committee and Chinese and foreign journalists at The Great Hall of People on Oct. 23, 2022, in Beijing.

Lintao Zhang | Getty Images News | Getty Images

Call it the China conundrum.

Why is a nation with ambitions to become the dominant economic power in the world doing so many things to blunt that potential?

“It’s the question of questions,” Orville Schell, director of the Center for U.S.-China Relations at The Asia Society in New York told CNBC, “because it is so illogical. When you have a good thing going, why do you screw it up?”

Schell and many eminent China experts debate whether the answer lies in Xi Jinping, leader of China since 2012, or in the very nature of the Chinese Communist Party, which has ruled over China since the Communist Revolution in 1949.

The economic moves are easy to list but hard to explain if one is trying to achieve ever more economic growth: the disappearance of prominent entrepreneurs, a new espionage law making it hard to do business, the dramatic shift of capital and loans away from the private sector to state-owned enterprises, just to name a few.

Those actions and more are leading to predictable results, MIT Sloan School Professor Yasheng Huang told CNBC, “the economy is slowing down, private investment is slowing down. There’s a massive flight of capital.”

The actions also seem to be a turn in the road for a country that, beginning in 1979, pushed through economic reforms which dramatically increased the role of the private sector, led to massive economic growth and lifted almost 800 million people out of poverty.

Xi vs. the CCP

Most, though not all, China watchers point to Xi himself as the instigator of those recent changes. While policy wonks split hairs over whether the U.S. and its allies are “decoupling” or “derisking” from China, Schell says “the real decoupler is Xi Jinping.”

Chinese officials at the U.S. embassy declined to comment to CNBC when asked about the criticism of Xi.

Ryan Hass, director of the China Center at Brookings, cites Xi’s “ideological rigidity and lust for control” which “is at odds with the pragmatism that defined China’s period of reform and opening.”

“China’s private sector, previously the growth engine of the Chinese economy, is paying the consequences,” he told CNBC.

It is Xi who has brought China’s pragmatic era of governance “to a crashing…

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