China is highly dependent on its trade surplus with the US. It is $400 Billion and represents about 4% of its 7% growth.
(Go tell TJ that)
If Communist China drops to 3% GDP growth because Trump zeroes out its trade surplus, and the US grows at 3% GDP, Communist China will never catch up with the US. This drives Xi Jinping, Dictator for Life, to use SOEs to keep up its growth rate. But it isn't going to work.
This is a comment in the article below.
China renews focus on state-owned sector as US trade war builds
Trump dispute heightens tension between central planning advocates and economic liberals
China’s trade war with the US and slumping growth at home is pushing Beijing to deepen its reliance on core state-owned institutions, even as liberals urge the continued opening of the economy and further market-friendly reforms.
Donald Trump’s trade battle against China, which has seen Washington impose tariffs on almost half of all US imports from the country, has sparked a renewed emphasis on self-reliance in food and technology that was a common theme during Mao Zedong’s era. That is “not a bad thing”, President Xi Jinping said last week during a tour of state farms in the northern province of Heilongjiang, which produce an outsized portion of China’s grain supply.
Mr Xi’s choice of venue was no accident. Along with the Liaoyang refining complex, a subsidiary of China National Petroleum Corp that processes crude oil from Russia, the state farms represent the value of China’s state-owned enterprises: politically reliable institutions that promise security of supply, even if that comes at the cost of commercially competitive operations.
Washington’s move to ban Chinese telecoms group ZTE from working with US companies for seven years shocked Beijing by revealing the company’s reliance on chips designed by American businesses. That triggered a renewed push for China to develop its own expertise in the sector.
Under Mr Xi, former state planning bureaucracies such as the National Development and Reform Commission have gained influence. Those bureaucracies view the private sector with suspicion, and favour top-down policies that enable them to direct money flows and monopolise approvals. Under their watch, the state has encroached into areas dominated by private companies during the reform era.
Fraser Howie, author of Red Capitalism, said the trade war had heightened the sense of isolation in China. “It plays to the idea that ‘We, China, we’re surrounded by enemies. America is turning against us and therefore all resources must be put at the disposal of the state’,” he said.
Last month, an online essay by tech entrepreneur Wu Xiaoping arguing the time had come for the private sector to give way to the state economy went viral in China. Some believe the author was being sarcastic. Others saw it and similar comments by party officials as a trial balloon for a complete shift in favour of the state, negating China’s four decades of hybrid, state-private economy.
“The key thing that’s forgotten here is that all private economic activity is at the discretion of the state,” Mr Howie said.
Twitter: @HornbyLucy
https://www.ft.com/content/f1ca06b2-c837-11e8-ba8f-ee390057b8c9 |
