Well they are “working on it” lol. We’ll see what new policies they announce in the coming months.
xiaohongshu
joined 1 year ago
Unfortunately I don’t see us going back that route. The Mao central planning era is viewed with disdain by the current generation of policymakers now that China has grown spectacularly under the reform policies. Also don’t forget that most of the current generation of leadership were victims of the Cultural Revolution, and the old school conservatives (who want to return to Mao’s planning era) have been purged in the 1990s.
I think there should be a shift back towards more centralization especially after the recklessness of the local governments and the ineptness of the central government to rein them in, but we’ll see.
Yes I have made it very clear before that the consumption problem is merely a symptom.
The elephant in the room that the Chinese government has yet to (and refuse to) admit is the growing wealth inequality over the past two decades.
This is why I have also said that the government cannot simply subsidize its way out of this problem. No amount of macro/micro policy adjustments can solve that. It can only be done by resolving the fundamental issue of wealth inequality.
Funny you classify me as a doomer when I have been one of the very few people on this site that actually says that China is already economically and financially resilient enough to take on the US empire.
The people who keep making excuses for China’s liberal policies “but China is too weak yet… it needs to build up its productive capacity first…” and my favorite “China is playing the LONG GAME don’t you know” are the ones who are dooming lol.
Consumption in the US is driven by credit (borrowing) while keeping wages depressed to maximize profit for the banking sector.
What we are proposing here (Marx/MMT) is the government directly raising the real wages of the working people so they have the purchasing power to directly consume. But perhaps more importantly, it reduces wealth inequality which structurally favors the flow of income to the rich.
Very big difference here.
I have been a long time follower of Yu Yongding and I don’t see how he’s saying anything different from what I said.
I have said many times that the slump in consumption is merely a symptom to the real issue of wealth inequality.
I have said many times that China cannot possibly subsidize its away out of this consumption problem without solving the wealth inequality problem.
The difference is in the solution. Instead of investing heavily in and betting for a “technological breakthrough” to achieve “economic transformation”, the country can simply invest in social welfare and raising the living standards of the people. The Soviet Union wasn’t exactly considered as a technology pioneer (compared to say, Japan, of the same period) but its people were living well. I don’t see why China shouldn’t go for the social welfare route (of course, they don’t, because they still believe in the power of the free market).
Michael Roberts unfortunately doesn’t know what he’s talking about on China. He’s ignoring the private debt problem, the local government debt problem and the entire complex array of government finances becoming deeply intertwined with the property market, shadow banks and the financial institutions.
Zhang Weiying is Austrian school people lol. They love this free market shit.
Stop the price wars: China’s state media guns target cutthroat industrial competition SCMP
People’s Daily again rails against the scourge of neijuan plaguing sectors from EVs to batteries
China’s Communist Party mouthpiece has taken another shot at the unsustainable price wars dragging down industrial profits in the world’s second-biggest economy, urging firms to abandon the race to the bottom and refocus on quality.
In a front-page editorial on Sunday, People’s Daily raged against cutthroat neijuan tactics “infesting” various industries with excess capacity, including electric vehicles, photovoltaics and batteries.
Neijuan, also known as “involution”, refers to a self-defeating cycle of excessive competition.
“Solar module prices have tumbled to just 0.6 yuan per watt, prices have been slashed on over a hundred EV models while producers of energy storage equipment seek to underbid each other in the race for orders,” the editorial said.
“Disorderly price undercutting and homogeneous competition have infested many industries, distorting the market mechanism.
“It is a race to the bottom and will weaken the competitiveness of the entire industry.”
The editorial echoed earlier calls by both People’s Daily and other state-run outlets to stamp out neijuan, which is proving intractable as business profits plunge, leaving many manufacturers struggling to realise even razor-thin margins.
Amid persistent deflation and simmering trade tensions with the United States, industrial profits fell by 1.1 per cent year on year in China in the first five months, with a 9.1 per cent decline in May.
Profits for China’s car sector, one of the foundations of the country’s economy, were down 11.9 per cent during the January-May period.
The People’s Daily editorial highlighted the decline of the neijuan-riddled sector, saying average profit margins dropped to 4.3 per cent last year, with only four EV makers – BYD, Huawei-backed Seres, Li Auto and Leapmotor – making money in 2024.
“Resources are wasted on inefficient competition, which stifles innovation and leaves an imbalance in supply and demand. Neijuan directly affects wage levels, government tax revenues, investment confidence and the whole economy,” it said.
It also warned that neijuan took forms other than price wars, including companies that abused their dominance of the industrial chain to exploit partners upstream and downstream.
In addition, the editorial pointed to businesses that cut corners on quality and made copycat products in sectors that already had excess capacity, as well as local officials who made misguided efforts to woo investment through unsustainable tax breaks and subsidies.
This is the second time in a month that People’s Daily has taken aim at the vicious cycle of low price, low quality and ineffective, unrelenting competition.
The newspaper said at the end of May that regulators must act quickly and efficiently to stamp out price wars.
A month earlier, Beijing-based Economic Daily said in a commentary that neijuan remained prevalent, defining the phenomenon as “the harder you work, the less you gain”.
Observers said authorities needed to take tougher action to help ailing businesses escape the trap – action that could be spurred by the state media calls.
“Neijuan’s harm has been explained umpteen times but businesses are unable to escape it … It requires firmer state action,” said Tang Dajie, a senior researcher with the China Enterprise Institute think tank in Beijing.
Tang added that neijuan remained a big disincentive for tariff-hit exporters to pivot to the domestic market.
“Many more firms and investors are waiting to see how well and quickly Beijing can tame neijuan. It’s also a litmus test of the resolve and effectiveness of Beijing’s policies,” Tang said.
In his annual work report to the country’s legislature in March, Premier Li Qiang vowed to mount a “comprehensive crackdown on neijuan”. That followed similar directives from the top leadership at the annual central economic work conference in December.
In the past, authorities have promised to curb all neijuan excesses while also vowing to respect the market’s role in resource allocation and to create a unified, level national market, among others, to ensure “survival of the fittest”.
This shouldn’t come as a surprise for anyone paying attention to my posts.
I have an idea though: how about we raise the wages of the working people so they have the purchasing power to actually buy these products at a price that pay the workers well? Is this too much of a radical idea?
Trump can smell weakness and goes straight for the killing blow. This is the kind of people he likes to bully the most.
Lenin was imprisoned and then exiled to organize from abroad. Stalin stayed underground and had to organize in secret, narrowly avoided prosecution by the authorities numerous times. These people were living dangerously.
Chinese communists had it even worse. During the Long March, attrition rate was 95%, either died fighting the pursuing KMT forces, or from exposure to the elements. Barely a few thousand cadres made it to Yan’an, outgunned and outnumbered, after trekking thousands of miles of the most arduous mountainous terrain. Without ideological conviction, the group would have disbanded long before they made it to their destination.
How is this self-harm? China is poised to win big if it can convince the US to not go through the divorce. China’s export-led growth model has benefited greatly from dollar hegemony and intends to keep it so. The rare earth threat was a stern warning for the Americans that they couldn’t decouple just like that.
It is Europe and the Global South who will be harmed as the new global supply chain is being shaped under the US. If there is no alternative framework emerges, then we will, at best, see a multipolar neoliberalism. We’ve had three years to observe the changes in the world, and so far, there is no indication whatsoever that an alternative to neoliberalism is being formed (Russia did propose dedollarization back in 2022-2023 but that project is now as good as dead with China and the rest of the BRICS not being interested).
To put it in another way, we need to approach this from a Marxist perspective: let’s first examine what is the principal contradiction that is threatening American capitalism at this very moment?
Under the backdrop of trade union movements and anti-war/anti-government/civil rights protests at home and excessive spending on foreign wars abroad up to the 1970s, the key weaknesses of the Fordist-Keynesian model that had fostered a labor-capital class collaboration had been fully exposed under the stagflation following the oil crisis. Their failures gave way to the rise of neoliberalism, whose solution to the stagflation was to brutally crush the labor movement and various protests at home by exporting the American industrial base to the developing world. What, you’re asking for higher wages? We’ll let the cheap labor in the developing world to build our stuff, how about that?
With the US abandoning the Bretton Woods and turned the dollar into a free-floating fiat currency, it gained the ability to leverage its monetary hegemony to obtain “free lunch” all over the world, all to the benefit of the FIRE sector (finance, insurance, real estate) while its industrial base was being hollowed out.
When the 2008 global financial crisis hit, with millions unemployed and many more businesses closing down, what remained of the American manufacturing sector never recovered. Disillusionment and disenfranchisement of the system led to the rise of populism in the 2016 election cycle, in the form of Sanders’s progressive movement and Trump’s MAGA movement, with significant overlap between their support base. The contradictions caused by neoliberal finance capitalism and the long-term effect of deindustrialization have finally resulted in visible and increasingly obvious cracks in the American capitalist system.
In short, American capitalism has been attempting to “escape” from its own contradictions since the first Trump term. It is no coincidence that Trump launched the first trade war against China back in 2018. The goal is to ensure American hegemony while at the same time, handling its trade deficit problem that has caused so much discontent at home. The enemy of the US is not China, but the contradictions caused by its own system. Everything that happened since: including Biden’s Ukraine war to negate the vast consumption potential of Europe, and Trump’s global tariffs against the world, needs to be understood and viewed within such framework.
The problem goes way deeper than a simple “Chinese is socialist or not” and we can write entire essays about that.
But here are some points to consider:
First, the Chinese governance after Mao is highly decentralized, and this has been especially the case since the 1994 Tax Sharing Reform that gave the local governments the authority of land financing. The central government controls the behavior of the local/provincial governments by setting the criteria for their promotion (e.g. the most important KPI is GDP growth, which is why you see so much obsession with the GDP growth numbers in China).
Second, the entire leadership believes in the IMF doctrine. This means export-led growth, and keeping wages low to maintain export competitiveness. China has the natural advantage of a huge labor pool, and was able to exploit it to destroy the competitiveness of its competitors after joining the WTO in 2001.
Third, after the 2008 global financial crisis, the local governments found a “cheat code” to keep GDP growth up - land leasing. This came at the right time as the central government promoted the 4 trillion yuan stimulus to boost the economy through infrastructure building. By forming a pact with property developers and local banking institutions (through shadow banks before 2015), local governments took out huge loans for infrastructure building to bid up the land price.
The problem here is that such massive infrastructure building phase was not centrally planned, or at least they weren’t planned well. Every local government competed with one another to entice the property developers and financial institutions, and eventually this turned into a proliferation of thousands of “ghost cities” - a massive oversupply of housing - that will never be occupied. It’s raising GDP for the sake of raising GDP. Many local officials received the career promotion of their lifetime simply by managing to jack up the GDP numbers.
We now end up with very nice looking villages and provincial towns, good infrastructure, but no jobs. Young people leaving for the big cities to look for employment and participate in the competition to the already intense neijuan (extreme competition) environment.
The recklessness of the local governments precipitated in the inevitable collapse of the property sector. However, at this point, it is too deeply intertwined land financing. Nearly 35% of local government revenues still come from land leasing, and you can imagine what a huge loss of the income (and hence the operating budget) with the fall in property prices.
So now they are betting on EV and solar panels (where green tech has been listed as a priority in the 13th Five Year Plan) and more recently, robotics and AI. Huge amount of investment have been poured into it by the local governments, making bets to recover their losses from the plunging land price. It’s one gamble after the other.
As the manufacturers receive massive subsidies from the local governments (because of competition, where each government wants the manufacturer to open their plants in their province), they become industries that are “too big to fail”. This is why even though the entire solar panel sector has been making heavy losses, you still don’t see bankruptcies coming out of the supply chain (yet). An inordinate amount of wealth continues to be poured into these industries to keep them from failing, because otherwise the local governments will take on even heavier losses as their investments go burst.
Add to the fact that the most important tax revenue is the value-added tax, they have to keep these industries alive by whatever means necessary. Now imagine where all these wealth come from to prop up these sectors? All those wealth could have gone into investing into giving welfare to the people.
Paradoxically, this means the wealth inequality grows, and the consumption (purchasing power) of the working people is reduced at the expense of even more investment to the manufacturing sector. As a result, domestic consumption falls, and the reliance on export grows so they can actually sell the goods are now in over-supply. If not, then the production will have to scale back, unemployment grows, and we get recession. Interesting, isn’t it? It’s one big circle back to relying on export-led growth once again.
We can keep going and this is really just a stream of consciousness of writing, but I hope you can see that the inability of the central government to rein in the recklessness of the local governments, the central leadership’s own belief in the IMF neoliberal framework, and the over-investment in sectors that are so deeply intertwined with the local government debt and the financial sector that it is now a very complex web of problems to disentangle.