The Chinese economy is losing momentum — again. Major banks are cutting their 2023 GDP forecasts for China, only months after raising these projections with much excitement when Beijing lifted the country’s COVID-19 lockdowns. If China fails to hit its own growth target of about 5% this year, it won’t have the pandemic as a scapegoat.
The truth is that China’s economic problems run deep. I have discussed repeatedly, for example, how local Chinese governments lack incentives to grow the economy. My analysis of Chinese Premier Li Qiang’s first 100 days in office reveals an apparent disinterest in solving deep-rooted problems such as these.
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To gauge how a Chinese premier, the second most powerful person in the country, runs the economy, it’s helpful to look at how he conducts routine meetings at the State Council — China’s central government. Official records of those meetings during Li’s first 100 days suggest a concerning outlook for the Chinese economy for years to come. The executive team of the State Council, a 10-person body led by the premier, held a roughly weekly meeting in which day-to-day decisions were made — until Li came along. As soon as he convened the first executive meeting, he reduced the frequency of the gathering to two-to-three times a month. This isn’t your workplace Zoom fatigue, where people who know better want to pay more respect to everybody’s time. Li had never worked in China’s central government before becoming premier. Chances are, he simply thought he had better things to do than running and hearing from the State Council.
Li ended up convening eight meetings during his first 100 days, and Beijing’s readouts of these meetings have an average length of 800 words. Li’s predecessor Li Keqiang held 13 executive meetings during his first 100 days in 2013. The readouts of those meetings were on average over 1,100 words long.
Li Keqiang wasn’t exactly a pro-market reformer; being overshadowed by Xi’s iron fist for 10 years didn’t help either. But he at least attempted to decentralize the decision-making to lower levels of the Chinese government or even the marketplace. That subject came up at nine of the 13 executive meetings in his first 100 days. When he was confronted with the issue of youth unemployment, he responded with policies to provide support for graduates to find jobs in small- and medium-sized enterprises in the private sector or to start their own businesses.
Readouts of the new Premier Li’s meetings were, once again, much less encouraging on this front. Besides parroting President Xi Jinping’s big slogans, an understandable necessity, they made no mention of any plans to delegate decision-making. To the contrary, the new boss seems to be running the economy like a “nanny state.” On youth unemployment, which is much more acute than a decade ago, Li’s idea was to incentivize companies to avoid laying off employees or even to hire more and bill the Chinese taxpayers.
That Li doesn’t understand economics is only one possibility, of course. That would be bad news for the Chinese economy for at least the next five years of his tenure. But another possibility is that this is by design: Xi means to continue to amass power and has no intention to pursue pro-market policies or to rely on someone capable of doing so. In that scenario, the Chinese economy would remain lackluster, at least until Xi leaves office.
And that might take much longer than five more years.
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Weifeng Zhong is a senior research fellow with the Mercatus Center at George Mason University and a core developer of the open-sourced Policy Change Index project, which uses machine-learning algorithms to predict authoritarian regimes’ major policy moves by “reading” their propaganda. He’s also the curator of the “Wei To Think Again” newsletter on U.S.-China competition.
