I am not bullish about China’s economy. Even 10 or more years ago, when many people thought China was going to be the economic superpower of the 21st century, I poured cold water on those predictions.
Simply stated, China suffers from too much bad economic policy.
Is it as bad as it was during Mao’s years, when the country was impoverished by pervasive North Korean-level statism and millions starved to death?
Of course not. The pro-market reforms of the 1980s and 1990s yielded positive results.
But those reforms were akin to a 400-pound man dropping down to 350. A step in the right direction, to be sure, but hardly a model of good health.
So it should not be surprising to see that China’s per-capita economic output is still far below American levels.
Unfortunately, it seems like Chinese policy is now getting worse, with politicians making government an even bigger burden.
And this is leading some people to “vote with their feet.” Here are some excerpts from a story in the New York Times by Li Yuan.
They went to the best universities in China and in the West. They lived middle-class lives in Beijing, Shanghai and Shenzhen and worked for technology companies at the center of China’s tech rivalry with the United States. Now they are living and working in North America, Europe, Japan, Australia — and just about any developed country. Chinese — from young people to entrepreneurs — are voting with their feet to escape political oppression, bleak economic prospects… Increasingly, the exodus includes tech professionals and other well-educated middle-class Chinese. …In 2022, despite passport and travel restrictions, more than 310,000 Chinese, on net, emigrated, according to the U.N. data. With three months to go this year, the number has reached the same level as the whole of 2022. …Most of the tech professionals I talked to took a pay cut when they emigrated. “I feel like I’m paying for liberty,” said…a U.S.-educated software engineer who quit his job at an autonomous-driving start-up in Beijing. He now works at an automobile company in Western Europe.
This out-migration is basically a referendum on China’s economic future, and people are voting against bad policy by leaving the country. Including lots of rich people.
Just like people in California, New York, and Illinois are voting against bad policy by leaving those states.
Since I’ve expressing pessimism about China’s future, here’s a tweet from yesterday the helps to further explain my sour outlook.
China is already suffering because of bad economic policy, yet at least one former official wants to make a bad situation even worse with huge tax increases. https://t.co/byVjhtUO76 https://t.co/NdrlHl5vBW
— Dan Mitchell (@danieljmitchell) October 2, 2023
At the risk of understatement, this is a staggeringly bad idea. China already suffers from awful industrial policy. Imposing European-level taxes would made a bad situation even worse.
Though the fiscal illiterates at the OECD and IMF would be happy.
P.S. I’m amazed that some American politicians want to copy China’s mistakes.
P.P.S. The official economic numbers in China are bad. The unofficial numbers are far worse.
