Neither a bull nor a bear be
The Economists, April 30, 2016
l 倫敦經濟學人說：許多唱衰大陸經濟之論點誇張了。
n 投資過多：富有國家資本累積是GDP三倍。中國目前仍然是2.4倍，和2010年水準一樣。
n 房地產崩盤：中國1990年代才開始准許私有話住宅。2000年代初期，房價仍低於市值。目前頭款仍然是20%，甚制多數人先用現金付一半。
n 政府其實一向可集中資源大力執行政策，中國仍有成長空間。
China’s Economy: What Everyone Needs to Know. By Arthur Kroeber. Oxford University Press; 319 pages; $16.95 and £10.99.
Street of Eternal Happiness: Big City Dreams Along a Shanghai Road. By Rob Schmitz. Crown; 326 pages; $28. John Murray; £20
CHINA’S economy inspires extreme and, often, diametrically opposed views. There is the bear case: growth is severely unbalanced, waste unbearably high and collapse nigh. And the bullish: past performance is proof of the government’s managerial skill, innovation is blossoming and China will soon surpass America as the global economic powerhouse. But between these extremes lies a wide expanse of “muddle-through” alternatives, which hold that China’s future will be far less spectacular: neither especially bright nor very gloomy.
If the notion of a middle way sounds intuitively appealing, Arthur Kroeber’s book brings rigour to the debate to show why it is also the most likely outcome. A longtime China analyst now managing an independent research firm, he launches an assault, albeit courteously worded, on conventional wisdom from the two opposing camps. What emerges is a nuanced take on an economy facing serious challenges, ones that do not spell its collapse but could prove intractable all the same.
Many of the commonly heard warnings about China’s economy are exaggerated. Take the opinion that it suffers from pervasive over-investment. At the start of its reform period in 1980, China had a paltry stock of factories, infrastructure and homes. The tried-and-tested way for an economy to modernise is to accumulate all of these, requiring a lengthy period in which investment grows faster than GDP. China’s experience in this regard has not been dramatically different from that of Japan, South Korea and Taiwan in their heady years; its investment mania has run on too long, but the benefits of the 30-year boom outweigh the waste. Most rich economies have capital stocks more than three times as big as their GDP; China’s was still just 2.4 times as high in 2010.
Similarly, fears about a property crash are overblown. China did not privatise home ownership until the 1990s, and prices were still far below their true value in the early 2000s, laying the groundwork for a surge. The leverage that caused havoc in property markets elsewhere in the last decade is not an issue: minimum down-payments are still 20% and buyers often pay closer to half in cash. Far more problematic is an excess of high-end homes and insufficient supply of affordable housing. The solution is more, not less, government involvement in helping home construction and guaranteeing mortgages.
Ultimately China should be able to do this, because marshalling resources to build stuff is its strength. But it is also clear that its growth model needs to change. Since the global financial crisis of 2008, it has become too reliant on debt and productivity growth has steadily fallen. Mr Kroeber lays out grounds for pessimism. Xi Jinping, China’s president, seems intent on a model of “Leninist capitalism”, reinforcing the Communist Party’s political grip, while also strengthening the economy with market reforms. This can work for a while: China still has scope to grow through industrial reforms, urbanisation and partial deregulation. Yet in order to become a high-income country, it needs innovation and efficiency, which are inconsistent with an overweening government. The model is not broken, but it is clearly running out of steam.
For all the clarity of Mr Kroeber’s writing, his book is heavy going for the general reader. Rob Schmitz’s book makes a useful complement. Its approach is the opposite: a portrait of China from the stories of a single Shanghai street. Still, there is much to link the two books in their marvelling at what China has accomplished, mixed with sadness at the human costs of its breakneck development.
Changle Road, the “Street of Eternal Happiness” of the title, is a poignant microcosm. Most visitors see only its exterior: a tree-lined street with expensive apartment buildings and trendy cafés. Mr Schmitz, a radio correspondent, chose to live there. Over the years, he learned about the ambitions, corruption and daily struggles seething just beneath its surface.
One neighbour, from a poor village, lifted herself from rural poverty into relative wealth by running a flower shop. Another is an older woman easily seduced by get-rich-quick investments, burning through her savings on one far-fetched idea after another. Most harrowing are the lives of the residents clinging to their homes on an abandoned block. The local government tried to seize their land. Demanding the compensation promised by law, they protested, and have faced harassment and intimidation ever since.
Yet coursing under even the bleakest stories is a sense of optimism that tomorrow will be better, with some evidence to support it. Families invest in their children’s education and, in time, reap the dividends. Migrant workers transform themselves from factory workers into cooks as the economy changes. Small entrepreneurs scrape their way to small successes. The energy and talents of China’s people are undiminished. The task for the government is to give them the space to thrive.
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