Noah Smith
I’m traveling, so here’s a timely repost.
China’s economy is having major problems. Despite the country’s dominance of global manufacturing, its living standards are starting to stagnate at a level far below that of developed countries. China’s growth has slowed down dramatically, from around 6.5% before the pandemic to 4.6% now, and there are credible signs that even that number is seriously overstated.
The piece is very much worth reading in full, especially for its portrait of Xi Jinping’s strategy for responding to the slowdown — basically, doubling down on subsidies for investment in export manufacturing, rather than Keynesian remedies to boost aggregate demand.
As I wrote a week ago, this strategy might make China militarily stronger by forcibly deindustrializing China’s rivals, but it’s unlikely to solve the country’s macroeconomic problems — overcapacity will just worsen deflation, exacerbating the debt burden on China’s households, banks, and companies.
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