Fear of a Weak China

by Reihan Salam

My column in tomorrow’s issue of The Daily is an extended riff on China and the prospect of a coming growth slowdown, so I’ll keep this post brief:

(1) Daniel Blumenthal has a really interesting and substantial post at Shadow Government on why China is getting pricklier: (a) it has a stronger military; (b) weak leadership at the top (as the revolutionary generation has faded, its successors find that they don’t have the legitimacy they need to assert themselves) has created a vacuum that the PLA is well-placed to fill; (c) and xenophobic nationalism is on the rise, fueled by a CCP desperately trying to find new sources of legitimacy (there’s that word again). Blumenthal also notes the potential impact of surplus males.

(2) David Barboza has a report in the NYT on rising inflation in China. Barry Eichengreen, Donghyun Park, and Kwanho Shin cite an uptick in inflation as a potential sign that a growth slowdown is on the way in “When Fast Growing Economies Slow Down,” their new working paper. Other factors that make a growth slowdown more likely: an undervalued currency and a rising old-age dependency ratio. Sound like any countries you know? And a spike in inflation could make the Chinese bourgeoisie restless. Wouldn’t want that.

Basically, I think we have much more to fear from a weak that sees its growth rate plummet than from a strong China that embraces the kind of economic and political reform it needs to stay on a high-growth trajectory.