George Magnus: China Leadership Monitor: "China’s TFP surged in the 1980s following the agricultural and ownership reforms, in the 1990s following the state enterprise reforms and the creation of a modern housing market, and in the 2000s as China prepared for and was then able to exploit WTO membership.... China’s one-party system deservedly has won plaudits when it has been most ambitious with regard to economic reforms and experimentation with market mechanisms. But this is not the case, for example, before the 1980s and again since 2012, when reforms were suppressed or stifled and inputs were boosted, but without any improvements...

...Hu Jintao’s economic record was not bad. On his watch, helped by the global boom and China’s WTO accession, growth rose from about 9 percent to over 14 percent in 2007, and then returned to 9 percent. Hu steered China away from the financial crisis and presided over wide-ranging social reforms. Yet, as Premier Wen Jiabao acknowledged while still in office, China’s economy became unbalanced, uncoordinated, unsustainable, and unstable. Xi Jinping inherited a fast-growing economy that was far too dependent on credit and investment, but the party, as he claimed, had lost its Leninist purity and direction.... Since 2017, economic policy has become incoherent. For example, the government wants to deleverage or de-risk the financial system but also to sustain high growth; to force banks to be prudent, but to lend more to risky borrowers; to make local governments observe hard-budget constraints, but to encourage them to borrow more; and to ostensibly encourage entrepreneurship, while strongly favoring the state sector.   The regulatory reforms in 2016–17 and the clampdown on egregious forms of risk-taking and financial behavior have been partially successful. Recorded credit growth has slipped back to just under 10 percent, growth of non-financial company debt has stabilized, and the risky funding structure of bank assets—i.e., the very short-term nature of borrowing—has lessened. Yet household debt has been in a protracted state of agitation. Household debt to income, now almost 120 percent, is higher than that in the United States. Local governments have a green light to borrow more to fund infrastructure. The government’s resolve to de-risk the system is faltering somewhat in the face of lower growth. The slower pace of credit growth simply means that the inflated $60 trillion of assets in the financial system will double in eight years rather than in five years.... The debt to GDP ratio, per se, is not a useful indicator to foretell a crisis, but rapid and persistent increases, as those in China, are. However, timing is uncertain. Because China’s debt is predominantly RMB-denominated, China’s template is less like that in the Asian crisis, or more recently the crises in Turkey and Argentina, and it is more like the crises in Japan in the 1980s or in the United States in the 2000s.... High-saving economies have succumbed to the zero or low- growth aftermath of having to address high debt. I think this will be the case in China as well....


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