President Trump: The NEW one and only politics thread

To the extent China has liberalized and allowed its markets to operate freely, it has unleashed a lot of economic capacity that has benefited a lot of Chinese people over the last several decades. But to the extent that China is still an authoritarian country that is subjected to a lot of centralized planning, it has had a lot of negative consequences, including civil rights abuses obviously, as well as extreme wealth disparity that goes well beyond what a lot of people are focussed on here (and can talk about freely here).

The only way that authoritarian government can stay in control is by using fear, while keeping the masses happy enough so they don't organize and revolt. The liberalization of its markets did that to a great degree and worked fabulously for decades. It allowed the standard of living there to increase dramatically. And that kept people happy enough to overlook the dictatorship.

When you are starting at the primitive base they were, China could grow the economy 7, 8, 9, 10 percent every year for several decades. At a certain point, though, they reached a maturity where that kind of growth wasn't possible. But they wanted (needed?) to keep the fantasy up. And China resorted to what every government does now: a debt / leverage-fueled gorge. That is where China is today. So much capital has been misallocated there over the last several years, things like ghost cities, empty airports and train stations, corrupt state companies given monopolies at the expense of competition, small banks all over the place offering leveraged investment products that are used to finance zombie companies to unsophisticated consumers for a little extra yield, with an implicit government guarantee that doesn't really exist, etc. And that debt is waiting to implode at some point. China hasn't figured anything out that the rest of the world hasn't. It is just like a lot of the rest of the world in terms of debt creation and extreme monetization of that debt to make it go on a long time. The difference with China is that capital has been misallocated in ways that can't even happen in the west, because there is a government that can just decree corruption when it benefits someone in power (or their family or friends). Regardless, the last several years China has been building a huge debt bomb for itself. There is no real genius to that.