Author Dan Wang joins Derek to discuss why China’s economy has slowed after decades of growth and the impact of this slowdown
This month, President Joe Biden and President Xi Jinping of the People’s Republic of China (PRC) met in San Francisco amid trade wars and even the prospect of a catastrophic hot war over Taiwan. Their meeting came at a nervous time in China’s history. After decades of spectacular growth, China’s economic miracle has stalled, with enormous consequences for its own people and the world. And yet, even as the worst aspects of China’s economy grab headlines, the fact remains that China is the mastermind of the green energy revolution, producing more solar panels, wind turbines and electric vehicles than any other country. To help us understand how China thinks about economics, technology, and America, we welcome back the show’s author, Dan Wang.
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In the following excerpt, Dan Wang Derek explains why the 2007/08 financial crisis caused China to take its economic model in a different direction than the US.
Derek Thompson: That’s why I really wanted to have you on the show to talk about a few topics related to China: what went wrong with the economy and the supposed Chinese century, but also what went right that the Western media might miss have.
First, let’s talk about the economy. In 2007, you returned to the financial crisis and told the writer Ben Thompson: “After the financial crisis, China decided that there was no longer much it could learn from the West.” Tell me about that. Why did China decide 15, 16 years ago that it was time to take a completely different course of economic growth than the West?
And money: I think the global financial crisis of 2007 and 2008 was a pretty pivotal moment for the Communist Party in Beijing. I think it would be a little too simplistic, but to play up this model… I think you could have told a story of the happy rapprochement between China and the US before 2007 and 2008, when there were some green shoots of political liberalism in China . When George Bush and Hu Jintao got together, there was a slightly stronger spirit of cooperation between these two countries. And then after 2007, 2008, China, along with many other countries in the world, looked at the US and said, “Well, maybe not.” This was a pretty devastating financial crisis based on that – the popular explanation at the time excessive housing, excessive speculation, people getting loans for houses. I think the Chinese looked at that model and said, “Maybe we shouldn’t have so much of a financialized economy that’s prone to financial crises like this.”
So I think they’ve started to shift a little bit to the other side, actually a lot more, towards a lot more political authoritarianism, a lot more centralization of power, as well as what I think is more of a retro put perspective on the economy. And fast forwarding to today, the way I described Xi Jinping’s view of much of the economy would actually be a pretty boring, traditional manufacturing superpower along the lines of today’s Germany. Or maybe you can talk about the United States in the 1950s, which had a very large manufacturing sector that employed a lot of workers in these traditional, boring manufacturing/capital industries because they didn’t produce too many political issues, [in] that they are not vulnerable to financial crises, that they do not advocate for major social change on the Internet, and that people are quite happy earning a wage by, to put it simply, turning wrenches on many different models of production.
And that’s why I think the Chinese government has really decided to do it again: less financialization, a little less of the disruptive Silicon Valley model and a lot more of this kind of boring, traditional, production-oriented growth.
Thompson: Before the crisis, it was a story of happy convergence. After the global financial crisis, it is the story of a deliberate divergence. Give me an overview of what that looked like and what life felt like in China. They no longer live in China; They now live in Connecticut. But how did Chinese residents feel about the kind of political centralization you describe?
Wang: Well, for residents of China – I wasn’t in China back in 2008 – I think there were two big differences that we can think about today. First, there was much greater political centralization in the five years following the financial crisis that led to the appointment of Xi Jinping as general secretary of the Communist Party. So Xi Jinping came to power with a party that felt, and in some ways admitted to itself, that there were many of these factions, that there were many of these factions, that there was a security chief who ran his own empires, that there were many other members of the Chinese elite simply not really listening to the leader. And then Xi Jinping came in with a mandate to really try to clean up power, to really make sure that there was a much greater centralization of power, which he didn’t do particularly effectively, to a degree that I think was quite I probably think he will be the ruler of China for life, at least for the next five to ten years.
The other manifestation of the economic divergence was – I think back in 2008, Derek, you were certainly reporting on these debates about the stimulus and how much America should have invested. I think there is now some economic consensus that the Obama administration did not invest enough and that there should have been a much more forceful fiscal response to the financial crisis. And there hasn’t really been a similar response to underinvestment in China. They had this huge infrastructure building boom. After 2008, they built a high-speed railway worth about 20 Japan’s worth. They built about 140 million housing units. I just saw this estimate from a bank about the population, say half of the American population: They built that up over the course of a decade. They built roads and highways. They built huge bridges. And so after the financial crisis there was a huge infrastructure boom to really rebuild the country.
This excerpt has been edited for clarity. Listen to the rest of the episode here and follow the Plain English feed on Spotify.
Host: Derek Thompson
Guest: Dan Wang
Producer: Devon Manze
Subscribe to: Spotify
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