The biggest difference between the American and Chinese approaches to economics and markets is about the role
of the state relative to the role of the market. While I won’t delve into the merits of these alternative approaches, I
will say that it is up to all government leaders in all countries to get the best balance between “state” (i.e.,
government influence and control of the economy) and “capitalism” (free market control of the economy and
capital markets) through the proper management and coordination of monetary and fiscal policy. They each do
it differently. How the Chinese are doing this can be confusing to people who don’t discuss what they are
doing with their policy makers and can’t see the consistencies that exist amid these seeming inconsistencies.
For example, President Xi has said that he wants to reduce the government’s role in pricing and allocating
resources at the micro level, increase capital market development, and stimulate entrepreneurship, at the same time
that he wants to strongly direct the macroeconomy, more strongly regulate markets, deliver public services, and
follow Marxism. This can be confusing to those who are used to these things not going together, aren’t speaking
with the policy makers to understand all of their circumstances and their perspectives about them, and aren’t
watching closely the decisions that they are making. I believe that I see the consistencies of these seemingly
conflicting policies and by and large would do what they are doing to make my financial system, economy, and
country stronger if I were in their shoes. In any case, I suggest that you not view what they are doing through a
lens of simple stereotypes (e.g., of “what communists do”) and accept that they will run their economy via
monetary and fiscal policy in the ways that they believe are best for them and seek to understand those ways
better. Since their results are extremely impressive, we should not expect them to abandon their approach
for ours and we should study their approach to see what we can learn from it, the same way they have
studied and learned from ours. After all, what we have is a competition of approaches and presumably what
we want most is to follow the best approach.
As far as foreign policy is concerned, during the Xi term, China has gotten stronger and more forceful while
the United States has become more confrontational. More specifically, from 2012 until now China’s
strengths grew; that became increasingly apparent and more openly shown (e.g., the Made in China 2025
plan openly showed bold plans to dominate certain industries that the United States was dominating) at the
same time that the American populist backlash emerged. This became most apparent after the election of
Donald Trump.
In 2016 Donald Trump’s election as a populist president of the United States came as he tapped into the
sentiment of those who suffered from globalization and were sympathetic to the view that China was
unfairly taking their jobs and unfairly competing. That is when globalization began to be smothered and
protectionism and nationalism began to be nurtured. At the time, China had become so obviously strong
and followed a number of practices that American policy makers and most people found objectionable. Also,
President Xi didn’t hide China’s economic strength and its ambitious goals to dominate a number of
industries that the US was dominant in, to go global economically, and to more forcefully assert itself in the
South and East China Seas and with countries in the ASEAN region. As a result, the perception of China as
a threat/enemy emerged, globalization reversed, and the “wars” began, starting with the trade war and
economic war, expanding to the technology war, the geopolitical war, and most recently the capital war.
During these years, China has continued to grow internally and expand its investment and business activities
outside its borders. For example, Xi developed the Belt and Road Initiative, which that will cost over $1 trillion
and impact around 70 countries, and it invested in many countries beyond that, especially in the developing world.
While these moves have been appreciated by many of those who got money, resources, trade, and soft-power
benefits (such as roads and other infrastructure), at the same time they were resented by those in recipient countries
who are having problems paying back their loans and find China too controlling, and by the United States because
it brought about China’s greater influence in these countries, which is coming at the expense of US influence.
As far as China’s internal politics are concerned, in 2018 Xi a) consolidated power around him and his
supporters (called “the core” leadership), b) amended the Chinese constitution to make clear that the
Chinese Communist Party has control over everything, c) eliminated term limits for the president and vice
president, d) created a supervisory commission to assure that government officials are operating consistent
with the party’s wishes, and e) enshrined Xi’s perspective called “Xi Jinping Thought” into the constitution.
Some people are concerned about this being a move to more single-leader/autocratic leadership akin to Mao’s
leadership. I’m not capable of having a reliable opinion about internal political matters in China, but I will pass
along what I am told, which is that this controversial move to tighter controls and more extensive leadership by Xi