This debate maps almost exactly onto the Britain/USSR dilemma I wrote about in my last essay, just with an economy instead of a state. Li Daokui's stimulus proposal assumes the old transmission mechanism between growth engines and broader prosperity still works, it just needs more fuel — essentially betting that more liquidity will restore circulation the way it used to. Sun Liping's argument is more unsettling: the "pulling up" mechanism itself has quietly stopped existing, so additional stimulus just pools in the upper body regardless of volume. That's the same fork Gorbachev faced — is the system fixable with more resources, or has the underlying architecture that made resources translate into broad prosperity already broken down? China's advantage over the USSR is that this diagnosis is happening in public debate rather than being suppressed until collapse forces it into the open.
Sun sees the breakdown of this old mechanism as driven by technological change, which is siphoning capital towards priority industries in the upper arm of the K." This is exactly what the aim of the current government policy
"Whether expressed as “strong supply, weak demand”, overcapacity or some form of a “K-shape”, a consensus has emerged that insufficient demand is the central weakness of the Chinese economy."
The starting premise of this article is wrong - there is no such "consensus", "Overcapacity" presumes production must be supply-pushed rather than demand-pulled, which is nonsense.
Folks like Glenn Luk have robustly challenged such superficial diagnostics championed by the likes of Pettis, whose predictions and diagnostics have been wrong for decades. See, e.g. https://x.com/GlennLuk/status/1711892278527295654.
Also, regarding Chinese "insufficient demand", is Chinese demand and consumption low in terms of monetary value, or in terms of the quantity of goods? This is key, since even the Chinese do not "consume" banknotes - see, e.g. https://asiatimes.com/2024/06/whats-the-real-size-of-chinas-economy/.
Finally, when the West complains about Chinese "overcapacity," it is only because they are now unhappy their competitiveness has dwindled, and the reality is they have "overconsumed" beyond their means. Meanwhile, the developing world can't have enough, and is benefiting hugely from an "overcapacity" of cost-effective goods.
This debate maps almost exactly onto the Britain/USSR dilemma I wrote about in my last essay, just with an economy instead of a state. Li Daokui's stimulus proposal assumes the old transmission mechanism between growth engines and broader prosperity still works, it just needs more fuel — essentially betting that more liquidity will restore circulation the way it used to. Sun Liping's argument is more unsettling: the "pulling up" mechanism itself has quietly stopped existing, so additional stimulus just pools in the upper body regardless of volume. That's the same fork Gorbachev faced — is the system fixable with more resources, or has the underlying architecture that made resources translate into broad prosperity already broken down? China's advantage over the USSR is that this diagnosis is happening in public debate rather than being suppressed until collapse forces it into the open.
Sun sees the breakdown of this old mechanism as driven by technological change, which is siphoning capital towards priority industries in the upper arm of the K." This is exactly what the aim of the current government policy
"Whether expressed as “strong supply, weak demand”, overcapacity or some form of a “K-shape”, a consensus has emerged that insufficient demand is the central weakness of the Chinese economy."
The starting premise of this article is wrong - there is no such "consensus", "Overcapacity" presumes production must be supply-pushed rather than demand-pulled, which is nonsense.
Folks like Glenn Luk have robustly challenged such superficial diagnostics championed by the likes of Pettis, whose predictions and diagnostics have been wrong for decades. See, e.g. https://x.com/GlennLuk/status/1711892278527295654.
Also, regarding Chinese "insufficient demand", is Chinese demand and consumption low in terms of monetary value, or in terms of the quantity of goods? This is key, since even the Chinese do not "consume" banknotes - see, e.g. https://asiatimes.com/2024/06/whats-the-real-size-of-chinas-economy/.
Finally, when the West complains about Chinese "overcapacity," it is only because they are now unhappy their competitiveness has dwindled, and the reality is they have "overconsumed" beyond their means. Meanwhile, the developing world can't have enough, and is benefiting hugely from an "overcapacity" of cost-effective goods.