Saturday, February 24, 2018

"China's Economy: What Everyone Needs to Know" by Arthur R. Kroeber

Amazon link

This book seems the best modern survey of the Chinese economy. I was interested in whether China is still a planned economy (as Michael Roberts has argued: "Xi takes full control of China’s future") or whether it has reverted to capitalism. I also wanted to get a sense of where the modernisation campaign has got to, and the prospects for coming political change.

Kroeber's book is useful for all these questions. It's incredibly well-informed; about as well-written as any book on Chinese political economy could be; and compelling and astute in its observations. As far as I can gather, despite the remarkable growth in the capitalist sector in recent decades (the powerhouse of the economy), the 'dominant heights' of the economy are still politically controlled by the Communist Party. This includes both the SOEs and some of the larger capitalist companies, where the ownership structure is opaque.

Kroeber argues that China has reached the end of its massive extensional period of growth and is now pivoting to intensive growth, relying on worker upskilling, an enhanced service sector, a further increase in the market sector at the expense of the deadbeat SOEs and Chinese leadership in technological innovation. This process is hard to reconcile with Xi's increasingly authoritarian policies (which are themselves driven by the need to break the power of defenders of 'the old ways'). It seems that another kind of pivot will be needed in the early 2020s if growth on the new course is to be sustained.

Kroeber emphasises that China is still, in terms of GDP per head, a poor country. It will take many decades to catch up with the G7 advanced capitalist countries. This is worth remembering when encountering yet another scaremongering article about the imminent Chinese challenge to American global hegemony.

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