The West over the past four decades developed a Pavlovian response to any hint of economic slowdown in China. Just as Ivan Pavlov’s dogs would start salivating when he rang the bell to indicate feeding time, Western investors and analysts would react to news of an imminent Chinese slowdown by excitedly preparing for massive government stimulus.
Alas, their conditioning did not prepare them for China’s new reality. They’ve been left salivating but disappointed time and again over the past couple of years.
Illustration: Dionne GainCredit:
Most recently at this month’s National People’s Congress, as investors watched breathlessly as Premier Li Qiang read out his annual government work report. But he announced no major new economic stimulus, so prices on the Hong Kong sharemarket dropped by 2.6 per cent.
Rather than the powerful post-COVID rebound the world had hoped for, the benchmark sharemarket indices in Hong Kong and Shanghai both lost more than 30 per cent of their value in 2021-23.
“It’s a super difficult time,” fund manager Vivian Lin Thurston of William Blair Investment Management told the South China Morning Post. “China is the only market in the world that’s really struggling.”
Which is why the West keeps expecting Beijing to splurge government funds to fuel a new boom. The West, the whole world, has made a lot of money from China since Mao’s era of Marxist-Leninist ideology ended and Deng Xiaoping began China’s “reform and opening” era under the slogan “to get rich is glorious”.
Chinese Premier Li Qiang with President Xi Jinping at National People’s Congress this month.Credit: AP
But most foreigners have failed to understand that era is over. They assume that strong economic growth is inherently desirable. And they grew accustomed to a Chinese leadership that felt the same way. But Xi Jinping styles himself after Mao rather than Deng. He values control above growth. The game has changed.
One clear indicator of the changed priority: in the past year, China’s pro-reform central bank has been downgraded while the hawkish spy agency – the Ministry of State Security – has been promoted in the Beijing power hierarchy.
China’s economy is in a terrible funk – just how Xi Jinping likes it
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26.03.2024
The West over the past four decades developed a Pavlovian response to any hint of economic slowdown in China. Just as Ivan Pavlov’s dogs would start salivating when he rang the bell to indicate feeding time, Western investors and analysts would react to news of an imminent Chinese slowdown by excitedly preparing for massive government stimulus.
Alas, their conditioning did not prepare them for China’s new reality. They’ve been left salivating but disappointed time and again over the past couple of years.
Illustration: Dionne GainCredit:........
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