China’s Hubris Is a Threat to Its Economic Future
(Bloomberg Opinion) -- China’s increasingly muscular interventions in the private economy have wiped hundreds of billions of dollars off share prices and sent investors scurrying to understand where the next targets will be. The country’s leadership has embarked on a risky top-down approach to economic policy-making that signals a departure from decades of market opening and engagement with the world, according to an Atlantic Council briefing paper released late last month by Dexter Roberts, a senior fellow with the Washington-based think tank.
The aim of Beijing’s government-directed and supported industrial policies is to create a more self-sufficient, more egalitarian country that will continue to grow rapidly, writes Montana-based Roberts, who is the author of “The Myth of Chinese Capitalism,” published last year. Before returning to the U.S. in 2018, Roberts spent more than two decades as the Beijing-based bureau chief for Bloomberg Businessweek, during which he reported from all of China's provinces and regions. Our conversation has been edited for length and clarity.
Matthew Brooker: Beijing to Montana is quite a change. Do you miss being in the thick of things in China?
Dexter Roberts: It was a huge shift. The population of Montana at the last census just barely passed 1 million people, and this is a state which is larger than Germany. By contrast, just the district that I was living in in Beijing, which was Chaoyang, was 3.5 million people. There’s a certain value in stepping aside from the day-to-day grind. I needed to take a step back and try to look at what did I learn, how did China change, how did I change, and I wasn’t doing that very well in China. I miss Beijing all the time. I miss the action and the excitement of being in a very big city and certainly in China in particular, which we all know is unlike anywhere else in the world.
MB: How has your thinking about China changed since you left the country, now you’ve got that distance and that perspective?
DR: An equally important question is how has China changed. In many ways, it has changed dramatically. Friends there watch with consternation, for example, the worsening relationship between the foreign press and the authorities. I came to China in 1995 and for many years there was an often symbiotic relationship. In the years after China joined the World Trade Organization there was a real sense among Chinese officials that it was worth their while to have a decent relationship with someone like myself. They wouldn’t always be happy with the stories that I wrote but they did feel at a time of economic opening that a business journalist could play a role in introducing China to the world. I had friends in the foreign ministry, and when I look at what’s happening right now it seems almost inconceivable.
MB: Where’s this all ultimately heading?
DR: I’m really worried that it’s on a path where the relationship will become worse and worse. People I knew were hopeful that things could improve with a new president coming into office. The thing I would remind them is: We’re only having an election in one of these two countries, and the president and party secretary of China has made it very clear that he has no intention of leaving anytime soon. We cannot ignore that a significant driver of tensions in the relationship is coming straight from Beijing. There is a sense among the leadership that their time on the world stage has come and conversely the United States’ time is passing. Xi Jinping said earlier this year the world is in chaos and time and momentum are on China’s side. He and senior officials in the Communist Party are extremely ambitious and intent on basically usurping the role of the United States across multiple dimensions globally. And despite real problems here in the U.S., you don’t have any officials here who are willing to let that happen easily. So I think we can expect things to continue to get worse. I hate to say that. I spent most of my life in China, I’ve lived longer in Beijing than anywhere else in the world, and certainly devoted my life to trying to understand China. I say that with sadness, but I’m not very optimistic at all.
MB: Are there any upsides to Xi Jinping’s strategy? Your book is very focused on rural migrant workers and how they’ve been relatively short-changed in China’s rise. Won’t Xi’s push for a more equitable society at least be good for them?
DR: It’s admirable that they have focused so much on trying to create a more equitable society. I wonder about some of the policies. To cite one example, in the battle against extreme poverty, where they’ve declared victory, a large part involves relocation of populations from areas that are perceived as not economically viable, not places where people can ever make a decent living. But you have to look where they go. I spent a bit of time going into these resettlement communities, and often it’s not at all clear what the future jobs will be. One I visited on the outskirts of Chongqing was basically taking all these middle-aged to elderly farmers and jam-packing them into high rises, and every job they had was related to helping themselves — so like, running the local store, being the superintendent of the building. Really what was driving the economy was money from the government. So my concern is, if there comes a day when China has to make hard choices about what it spends its money on — and I think that day is coming, for a whole lot of reasons — will they have the money to support these big resettlement communities?
The other thing is policies not taken, which I focus on in the book. We’ve been hearing about the necessity of household registration, or hukou, reform for years now. They’ve made various piecemeal reforms but since at least 2013 they’ve made it very clear that they plan to be on a path toward moving radically away from the household registration system and the reality is they’ve done very little.
MB: I was just looking through the five-year plan and there’s a commitment to hukou reform there. So we shouldn’t take that at face value?
DR: I find it very difficult. Similarly with reforms to rural land policies so that farmers and migrant workers can monetize their plot of land — rent it or sell it at market value. They’ve been talking about that for an equally long time and they have made, to my mind, very little progress. So I take it with an enormous grain of salt.
MB: Sun Dawu, the rural entrepreneur and government critic who you mentioned in your Atlantic Council briefing, just got 18 years in prison. China appears to be less tolerant of dissent than at any other time in the reform era. There is a school of thought that this is a paradoxical sign of insecurity on the part of the government. Do you share that view?
DR: I think it’s both. There is clearly greater confidence, if you look at the “wolf warrior” approach of the diplomats and so on. Part of it is this growing pride that China’s time has come and trying to be more forceful in dealing with the world. Because of that feeling that they don’t have to answer to the rest of the world as much, they are more willing to do things like put an entrepreneur in prison for 18 years — and if a U.S. official brings it up, say something like, this is none of your business, stop meddling. Whereas they may not have done that before.
On the other hand, I do think there is insecurity. There is a sense that there’s a danger in allowing civil society to flourish, there is a danger in allowing people to organize and try to do things for society out of the Communist Party system. So in a contradictory fashion you can see both this nervousness and the reverse.
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MB: Can they achieve their ambition of surpassing the U.S.?
DR: They have done very well and the economy may overtake the U.S., but who is to say they stay in that position? There are tremendously serious stresses in the economy that will be very difficult to deal with. There’s the demographic challenge — there will be four working people for every retiree in not too many years. They seem to be unwilling to do certain reforms. There’s been a real drying up of the productivity that’s been driving the economy.
MB: Do you see signs of hubris?
DR: There is certainly hubris. I think they are overly confident about what they can do. There seems to be this idea that they can continue to grow fast even as they stamp on private enterprise and don’t carry out reform. There’s this sense that things have gone badly awry. Xi sees the inequality and looks at people like Jack Ma making all this money and he doesn’t like it. He has this idea that he can really rein in the private sector and continue to grow the economy while redistributing wealth. My feeling is that economies don’t work that way.
The hubris is from the top. Look at Xiongan [the new city being developed near Beijing that is intended to take over some functions from the capital]. There’s no obvious reason it should be there.
MB: What does the future hold for you personally? Do you plan to write more books on China? Will you go back?
DR: Yes and yes. I am actually starting to put together what I hope will be a plan for my next book. When I left three years ago I was quite certain I was going to be back within 12 months. But then obviously we had the pandemic. Now we don’t really know when China is going to reopen to the world — probably at least not until the party congress next year. Also, the place has changed and attitudes toward the rest of the world and people from outside China have changed a lot too. So I just don’t know how soon that will be.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Matthew Brooker is a columnist and editor with Bloomberg Opinion. He previously was a columnist, editor and bureau chief for Bloomberg News. Before joining Bloomberg, he worked for the South China Morning Post. He is a CFA charterholder.
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