Xi Jinping’s Belt and Road Initiative — launched in 2013 with the prosaic ambition of funding infrastructure projects within and outside of China — has attracted two main critiques.
Some saw it as an attempt to build neocolonial influence across emerging markets as US power waned. Others saw the failure of specific projects as further evidence of economic over-reach, already widely associated with Chinese ghost towns and bridges to nowhere.
To Thomas Orlik, chief economist at Bloomberg Economics, these responses amount to an acute case of what he calls “sinophrenia” — a condition of modern commentary that combines the belief that China will imminently collapse with the belief that it is taking over the world. It may be the sign of a first-rate intelligence to hold two contradictory ideas in your mind at the same time. But Orlik argues that both views focus so intently on their own version of the future that they miss what exactly is happening in the present.
As a result, a lightly professorial “yes and no” tone pervades this wide-ranging and nuanced survey of China’s recent economic history which gently challenges the prevailing orthodoxy.
The book divides the country’s reform-driven history after the 1976 death of Mao Zedong into distinct cycles: the opening of the economy under Deng Xiaoping; the period from the crackdown after the 1989 Tiananmen demonstrations to the 1997 Asian financial crisis; and the changes associated with China’s 2001 entry into the World Trade Organization.
We are nearing the end of a fourth cycle, which began with infrastructure spending to counteract the effects of the 2008 crisis. The implication from these cycles is that China has demonstrated a continued ability to fend off crises, which casts doubt on fears of impending collapse.
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Orlik partly explains this resilience as the “advantage of backwardness” — China’s economy in the mid-20th century dramatically lagged behind many other large nations and had more room to rise. He also suggests the country’s policymakers are “more imaginative and flexible than their critics give them credit for”. They have “faced down” the Asian financial crisis and the crisis of 2008, stopped equity routs, and prevented capital outflows.
There is no shortage of pending challenges: an enriched middle class that may demand political liberalisation; the need to reform the state’s control of economic activity; runaway real estate prices. But this is a Leninist state, that can shift policy fast without meddlesome factional feuding (at least, without it in the open).
Orlik outlines several familiar ways in which China could continue to stave off crisis, including transitions to a more dynamic private sector, or to more service-driven economy, or by reducing export-dependency. More importantly, he develops detailed arguments that these transitions, among others, are more fully under way than is often acknowledged.
The strength of this book — and one that is even more valuable as US-China tensions rise — is its capacity to resist stridently ideological interpretations of the Chinese model. It is instead a history of crisis and response, in which policymakers are often seen as learning from earlier experiences. But the seeming clarity of China’s economic lessons may be a product of constraints on information and intellectual freedom that Orlik points to elsewhere. More deeply debated histories tend to divulge less clear-cut truths.
Moreover, the state’s control complicates the ability to identify economic trouble, such as rising unemployment, in the first place. If history is built only on crises that are able to smash through information constraints, the bar may be too high.
Lastly, the book provides strong evidence of the Chinese government’s competence and flexibility when faced with challenges. But it is not necessarily straightforward to conclude, as implied through learning from history, that the main goal of the individuals running the country is stability.
After all, the global history of crises has already taught us that it is extraordinarily difficult to map out the incentives built into the bureaucracy of a single investment bank, let alone the Chinese Communist party.
Thomas Hale is the FT’s Shanghai correspondent
China: The Bubble That Never Pops by Thomas Orlik, Oxford, $29.95, 240 pp