Why China Won’t Give Up on a Failing Economic Model

As the party sees it, consumption is an individualistic distraction that threatens to divert resources away from China’s core economic strength: its industrial base. According to party orthodoxy, China’s economic advantage derives from its low consumption and high savings rates, which generate capital that the state-controlled banking system can fu

According to government statistics, 27 percent of Chinese automobile manufacturers were unprofitable in May; at one point last year, the figure reached 32 percent. Overproduction throughout the economy has also depressed prices generally, causing inflation to hover near zero and the debt service ratio for the private nonfinancial sector—the ratio o

Xi’s growing emphasis on making China economically self-sufficient—a strategy that is itself a response to perceived efforts by the West to isolate the country economically—has increased, rather than decreased, the pressures leading to overproduction. Moreover, efforts by Washington to prevent Beijing from flooding the United States with cheap good

The lack of a social safety net for older citizens is probably one important driver of China’s astonishingly high savings rate, which has been estimated to be as much as 40 percent.

Furthermore, if the Great Safety Net 2.0, that of the twenty-first century, is imagined in China rather than in the Western world, Western nations might be the last to embrace it. More likely it will be deployed in other countries, those best capable of leapfrogging, before it’s replicated in Europe and the US (if at all). And as a Great Safety Net

China’s sixth five-year plan (1981–85) was the first to be instituted after Chinese leader Deng Xiaoping opened up the Chinese economy. Although the document ran to more than 100 pages, nearly all of it was devoted to developing China’s industrial sector, expanding international trade, and advancing technology; only a single page was given to the t