Page 72 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

BANKING
“In a true democracy, there are necessary opposing forces, debating their opposing agendas. is results in better investments, greater dependence on business, and more innovation.”
If one postulates that the Chinese government’s portion of overall GDP has continued to grow at previous rates, then one can ignore the 60 percent portion of the 8 percent growth as state-driven (i.e. 5 percent of the rate itself ). What remained then, in terms of consumer and business demand in 2014, was a 3 percent growth rate. In that case, assuming that 5 percent growth remains state spending, non-state driven demand grew at a paltry 1.7 percent. at’s almost a 50 percent decline – and there’s your explanation for the decline in commodity prices.
What’s next for China’s economy is also up for debate. e Chinese economy is a miracle, goes the argument. China will now turn to its own consumers, selling goods to its newly-created middle class. But, this argument is inherently naive. It ignores the truth of the Chinese miracle: that, at its centre, there is no democracy.
Sure, the Chinese system is sometimes referred to as a new form of capitalism that does not require democracy. On the contrary, it is only within a one-party state that such a high degree of government demand could possibly occur. In a true democracy, there are necessary opposing forces, debating their opposing agendas. is results in better investments, greater dependence on business, and more innovation.
In China’s case, the government is the main driver of its growth. It forces non-pro table businesses to keep going, by rolling debt, and orchestrates mega-projects, irrespective of consumer demand. ere is only one way this ends: with a debt overhang that will take a decade or more to unravel. e single-party state will endure longer. And many of its empty cities will remain just that, empty.
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