The China Thread

[Jacob]

I wouldn't just be worried about "common prosperity for all" if I were them, but also the general turn against the symbols of the West. Those brands are used to signal status not just by displaying wealth, but by proclaiming a connection to Western sophistication. For the longest time, Western was seen as better than Chinese across a whole swathe of areas, but that doesn't seem to sit well with Xi and his clique. I would not be super surprised if they attempt to replace those symbols with something more Chinese.

[Josquius]

I'm sure I've read stuff to that effect in the past yeah. Fits in nicely with the quite logical race to beat the wealth gap and follow the Korean and Japanese established leap up to quality manufacture.
Of course China is starting from a much lower place than Korea and Japan ever did when they were in the bulk manifacture space. AFAIK Japanese products were regarded as cheap shit that broke easily, not actively dangerous.

[Syt]

https://www.reuters.com/world/china/china-suspends-approval-new-online-games-south-china-morning-post-2021-09-09/

China slows down approval for new online games - SCMP

Sept 9 (Reuters) - China has temporarily slowed down approval for all new online games in a bid to curb a gaming addiction among young people, the South China Morning Post reported on Thursday citing people with knowledge of the matter.

The SCMP said the strategy to slow down approvals emerged after a Wednesday meeting between Chinese authorities and gaming firms including Tencent Holdings Ltd (0700.HK) and NetEase Inc (9999.HK).

Beijing on Wednesday had summoned gaming firms including Tencent and NetEase.

Tencent declined to comment. NetEase did not immediately respond to Reuters request for comment.

China moved in August to ban under-18s from playing video games for more than three hours a week, saying this was needed to curb a growing addiction to what it once described as "spiritual opium". read more

China has conducted a broad crackdown on a wide range of sectors including tech, education and property to strengthen government control after years of runaway growth. read more

(This story was corrected to say China "slows down" approvals, not "suspended", in headline and paragraph 1 and 2 after SCMP clarifies. Also, corrects paragraph 2 to say China's strategy emerged after a meeting and not at the meeting)

[Josquius]

Also in gaming read yesterday China is freaking out and review bombing the new life is strange game because somewhere in the background in a room is a tibetan flag.
Seems to me with China cracking down on games that this sort of thing offers great free advertising.

[Sheilbh]

So not sure if this should go here or books thread - but this new book keeps coming up on podcasts I listen to and sounds fascinating: How China Escaped Shock Therapy.
https://blogs.lse.ac.uk/lsereviewofbooks/2021/09/07/book-review-how-china-escaped-shock-therapy-the-market-reform-debate-by-isabella-m-weber/

[The Minsky Moment]

So not sure if this should go here or books thread - but this new book keeps coming up on podcasts I listen to and sounds fascinating: How China Escaped Shock Therapy.
https://blogs.lse.ac.uk/lsereviewofbooks/2021/09/07/book-review-how-china-escaped-shock-therapy-the-market-reform-debate-by-isabella-m-weber/

Seems to me a bit of a straw man and missing the point.

"Shock therapy" was a program proposed for already well developed and middling+ advanced economies like the former USSR and eastern Europe in the 80s and 90s.  Not for impoverished countries at or just above subsistence like China just after Mao.

I think it is understood in the literature that development from that low income tier neither requires nor typically involves radical free market policies.  That wasn't the case for Korea or Taiwan, for example, usually cited as two the leading cases. 

The USSR itself demonstrated the feasibility of industrializing using a central planning model.  It clearly can work especially if one is willing to pay any humanitarian cost to make it work - the problem is that one hits a developmental-technological ceiling at a middle income stage.  Mao attempted that model but failed because his regime was so horribly dysfunctional.  It did, however, establish a human capital base for future development by raising basic levels of educational attainment and health care provision.

When Deng was reforming in the 80s I don't think shock therapy was a on the table as a policy model.   As an example see page 54 of this 1983 World Bank review which discusses the Chinese agricultural reforms; it is discussed as introducing the use of market based mechanisms within the overall framework of collective land ownership: https://openknowledge.worldbank.org/bitstream/handle/10986/5966/WDR%201983%20-%20English.pdf;sequence=1.  The report reviews these policies favorably.  It does not criticize China for adopting half-measures, nor does it recommend a shock transition to a full market system.  On the contrary, the one caveat expressed in the concern for "whether the new system can retain the advantages of the old system in financing social services for the poor and in organizing large-scale investment"

The more interesting question is how China was able to implement this development strategy at scale.  In the 80s and early 90s many believed that the Korea, Taiwan and HK examples could not work in the PRC because China was too big.

[Sheilbh]

The argument of the book is that it was a debate within the Chinese elite during the eighties.

So I think the way she describes "shock therapy" is basically as a combination of measures - price liberalisation (probably the most important) as quickly as possible, macroeconomic austerity (fical and monetary) followed by privatisation and trade liberalisation. And I think there's a normative sense to "escaped" but, also, I think we have internalised the meaning of "shock therapy" as something that is sort of imposed from the outside - it's an IMF/World Bank policy package, which I don't think is quite right for the period she's talking about.

Her argument is that there was a debate within Chinese policy-makers over this, though it was called "package reforms" in China. This was in the 80s so pre a lot of the USSR and Eastern European experience (or, rather, parallel to it). So the only recent examples were the UK and Chile, but in the context of China and transitioning from a state dominated (or in China, totally centrally planned model) the relevant comparison was post-war Germany and the Erhard miracle - which Chinese economists and policy makers were apparently incredibly interested in and they studied a lot (the discovery that Erhard's policies also resulted in Germany's only general strike is a reason they decided not to go for it). Although interestingly as well as Germany, they sent economists to Hungary and Yugoslavia in the 80s where they were also told the risk is the price liberalisation because it's really difficult to control and challenging for - like theirs - a "socialist" society.

Basically the strong reformers wanted to go for all of the package reforms with big bang price liberalisation (the shock of shock therapy), while the gradualists didn't. All of the Chinese policy makers were agreed they needed reform it was just the pace - also interesting here are concerns from a specific Chinese context so they apparently refer a lot to the risk of hyperinflation which they considered did in the Republic after the war and look at PRC policies to recover from the immediate post-war, but also look back at historic taxes and the concept that you control what is "heavy" and don't control what is "light". So the gradualist model was basically you release controls on what doesn't matter, but the essentials (household essentials and heavy industrial essentials) you keep control of for now.

Her argument is that the gradualists won the argument in 1986. In 1988 the students and intellectuals were broadly on the side of the reformers and the reformers get more, but it was, in part, the resulting inflation on core essential goods that spread the protest movement because it was clear there would be losers from marketisation, but also the gradualist approach had allowed for corruption to explode. Interestingly the liberal strong reformers were broadly people like Jiang Zemin who led the crackdown on protests in 1989, while the gradualists were more moderate in terms of their politics. Looking into the 90s it's not direct but basically the pro-package reform group tend to be pro-trade, pro-coastal development etc while the gradualists tend to be more pro-rural development etc.

But I think her argument is basically that there was this huge policy debate in China during the 80s over whether to adopt similar measures to the USSR (and Eastern Europe) or take a different approach to liberalisation/marketisation of the economy and the end result is that China not only ended up escaping shock therapy, but sort of the binary around it of free market v planned economy which is partly why China ended up on a development strategy to link to your question.

Haven't read it yet and it sounds very interesting.

[The Minsky Moment]

That's all new to me.  Every account I've read up to this point about China's development in the 80s describes regionally based and locally based experiments that often began as grey areas or even illegal but that proceeded with some wink-nods from the top. Failures were either abandoned or stopped and successes spread.  I've never heard the claim that there was serious debate in the early/mid 80s about full market liberalization across the whole country.  To say I am skeptical of that claim would be an understatement.  It sounds like an exaggeration of the influence and potential clout of some theoreticians in the reform camp.

[Sheilbh]

Maybe - people are raving about it and it's getting very strong reviews etc so it'd be interesting to see.

Separately what's happening with Evergrande and how much does it matter?

[Jacob]

Separately what's happening with Evergrande and how much does it matter?

I don't know enough about finance to have any firm opinions...

I think it's a sign of some of the structural weaknesses of the Chinese economy, and how it's not serving the needs of ordinary Chinese (i.e. housing is out of reach of many).

I think broadly speaking it's part of the realignment of the Chinese economy under Xi. It looks like they're not taking concerted action to backstop Evergrande, which I assumes means they're not super worried about wider contagion. In that context it's another signal to the super wealthy and business that the CCP calls the shots.

Is it going to trigger a collapse in the Chinese construction and housing markets? Maybe. Will that trigger a global collapse of some sort? Doubt it.

[The Minsky Moment]

Separately what's happening with Evergrande and how much does it matter?

Seems like a very western-style financial scandal.  Big developer leverages up and builds too much on spec, gets overextended, allegations of misleading disclosures and poor operating controls fly.

Hard to assess impact without knowing exactly who the creditors are and how much they are each in for.

[Sheilbh]

On a more light-hearted note - this is great:
https://www.theguardian.com/world/2021/sep/20/chinas-ugliest-buildings-contest-to-celebrate-unsightly-architecture-begins

Strongly recommend clicking through to the Chinese pages for the ones that aren't pictured and looking through the slideshow - the interior of the matryoshka shaped and themed hotel is quite something.

I actually genuinely kind of like this:


But questions need to be asked of the architects who built this

[The Brain]

Yeah. "When did you decide to be awesome?"

[Josquius]

I wonder what the inside of that Sci fi pyramid is like.

The 3 wise men.... Well... Ive seen worse I must say. I appreciate the scale and it looks like it belongs rather than being too new and shiny or falling apart in too obvious and rapid a way.

[HVC]

On a more light-hearted note - this is great:
https://www.theguardian.com/world/2021/sep/20/chinas-ugliest-buildings-contest-to-celebrate-unsightly-architecture-begins

Strongly recommend clicking through to the Chinese pages for the ones that aren't pictured and looking through the slideshow - the interior of the matryoshka shaped and themed hotel is quite something.

I actually genuinely kind of like this:

Did you play a lot of Qbert as a kid?