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The View | How China sacrificed economic growth on the altar of Xi Jinping Thought
- China’s slowdown is being driven by a structural transformation of the economy, payback for past excesses and a shift in the ideological underpinnings of governance
- Xi Jinping is prepared to forgo growth in the interest of cementing political power and pursuing his dream of national rejuvenation
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Since the days of Deng Xiaoping, economic growth has mattered more than anything for China’s leaders. The 10 per cent annualised growth from 1980 to 2010 was seen as the antidote to the relative stasis of the Mao Zedong era, when the economy grew by only about 6 per cent. But under President Xi Jinping, the pendulum has swung back, with 6.6 per cent average growth from 2013 to 2021, closer to the trajectory under Mao than Deng.
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Some of the slowdown was inevitable as small economies are better able than large ones to sustain rapid growth rates. As China’s economy grew – from about 2 per cent of world GDP in 1980 at the time of the Deng take-off, to 15 per cent when Xi assumed power in 2012 – an arithmetic slowdown became only a matter of time. The surprise was how long it took to occur.
It is possible to quantify the foregone Chinese output from the slowdown. Had annual GDP growth remained on the 10 per cent trajectory under Xi rather than slowing by nearly 3.5 per cent since 2012, the Chinese economy today would be about 40 per cent larger.
Yet, China’s slowdown is far more than an arithmetic event. Three powerful forces are also at work – a structural transformation of the economy, payback for past excesses and a profound shift in the ideological underpinnings of Chinese governance.
The structural explanation puts an optimistic spin on the slowdown by framing it as the by-product of a strategy to improve the quality of economic growth. By staying the course of hyper growth for too long, China became increasingly afflicted with the “four uns” of former premier Wen Jiabao – an economy that was unstable, unbalanced, uncoordinated and ultimately unsustainable.
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Rebalancing was the only way out, especially if it led to greener, consumer-led and services-intensive growth that addressed the twin goals of balance and sustainability. If slower growth was the price, it was well worth paying.
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