Kevin Williamson has written a highly perceptive and powerful piece on the state of the Chinese economy.

Yes, I realize that saying Kevin Williamson has written a “perceptive and powerful” article is like saying your goldfish was swimming in his bowl this morning; it’s the natural state of affairs.

Many China watchers believe that China is headed for a long period of stagnation, precisely because, as Williamson notes, the regime’s interference in the economy has produced a huge amount of structural waste that is dragging down growth.

China has no reliable banking system or legal system, a huge amount of debt (much of it acquired when the regime panicked in response to the global fiscal crisis in 2008), industrial overcapacity, an aging population, and enormous environmental damage that angers and harms the population — damage that the regime therefore cannot ignore, and that will cost a lot of money to remediate.

What China needs is a big dose of economic freedom, but it’s not going to get it, because:

‐There are huge vested interests that would be endangered by real reform.

‐The state owns about half of the economy, and wants to use that part it doesn’t own for state purposes, all of which is inconsistent with the operation of free markets and antithetical to growth.

‐The Chinese Communist Party doesn’t believe in freedom.

What we can expect instead is more government maneuvering to prop up the system, more deception about the real state of the economy, more theft of technology, more discrimination against foreign firms to help the domestic ones, more repression as a stagnating economy makes the regime feel less secure and, unfortunately, more aggression, because the regime uses nationalism to deflect popular discontent, which will grow if the economy stagnates.

For a good explanation of China’s economic prospects, here is Derek Scissor’s testimony on the subject before the House Foreign Affairs Committee.

It’s much longer than the Williamson piece, but equally as perceptive and powerful.

Williamson makes the point that the United States has many of the same problems as China. The point is well taken, but the United States — for all the government’s excesses — has the problems to a much smaller degree and has much more stable and developed institutions with which to respond. In other words, here the problems are bugs (albeit big and dangerous ones) in the system; there, they are features.

I should add the usual caveat: China is hard to figure out, and predicting what it will do in the future is a hazardous enterprise. But, having said that, the signs are not good.