Editor’s Note: Kristie Lu Stout is the host of “On China,” a talk show on CNN International. This month’s episode tackles China’s economic slowdown.
Slowing exports and rising debt levels hurting China's economy
Experts also question whether regulators and officials can guide economy
Painful reforms could lead to discontent among workers
OK, we know China has its issues.
Once the dependable engine of rapid expansion, the world’s second-largest economy is now posting its weakest annual growth in 25 years.
But the biggest concern may not the slowdown itself but the strategists tasked with guiding the nation forward and engineering a steady transition to sustainable economic growth.
“All these people who market themselves as really capable and on top of things now look clueless,” says Andy Xie, an independent economist.
“We have not seen enough of an effective response and that’s really worrying. Instead, we are seeing psychological therapies, trying to persuade people to think optimistically and everything will be fine.”
Xie is well known for his bearish views on the Chinese economy. But Liang Meng, a private equity investor, is more prudent.
“It’s not about the long-term prospects of China – I think most business leaders are still very positive,” says Meng, a co-founder of Ascendent Capital Partners.
The issues are more short term, he says, warning of “a lack of direction and uncertainty about regulations.”
Corruption crackdown reverberates
China’s previous aura of economic invincibility has been undermined by the impression that officials don’t always seem to know what they’re doing.
Last year, Chinese state-run media encouraged individual investors to pour their savings into stocks just before a major market rout.
To try stop the market volatility, the government introduced circuit breakers, a measure it later acknowledged was a mistake.
It has spent hundreds of billions of dollars in the past year to shore up the yuan, but still allowed two sharp devaluations of the currency that rattled global markets.
President Xi Jinping’s sweeping crackdown on corruption has complicated matters further as it ensnares prominent businessmen, senior securities regulators and the former head of the National Statistics Bureau.
The war on graft has not only uncovered “major problems” within the system, it has also put a strain on the supply of top talent in China.
“Going after the bad guys, he created some unintended factors,” says Wall Street Journal correspondent Wei Gu. “People working for the government are so nervous about their jobs… so the best talent is not going to continue to work for the government.”
“If you want a strong government and a strong regulator to play by the rules and come up with smart policies, these people are not there anymore,” Gu says.