Xi Jinping Keeps Trying to Rescue the Market—So Why Does It Keep Getting Worse?

That China's economy is in serious trouble is no longer news. Xi Jinping's tactics for rescuing it, meanwhile, have grown ever more bizarre, largely defying the public's basic understanding of economics. Yet no matter how the rescue is attempted, Hong Kong and mainland Chinese stocks only rally briefly before sliding back into decline, and foreign capital keeps fleeing. In truth, China's policy toward the West has gone seriously wrong, and this is closely tied to a fundamental misreading of what actually drove China's economic rise in the first place. “Chief Accelerationist” Xi Jinping’s China Dream, a Fantasy Chinese officials and ordinary citizens alike have long looked to Japan and the "Four Asian Tigers" as models, since both Japan and the Tigers rose to prominence by exporting vast quantities of cheap goods to Western countries. But that is only the surface of the story. A closer look at how the Four Tigers developed afterward shows that China's assumption that it could casually defy the West was nothing but a recipe for embarrassment. It is true that postwar Japan exported large quantities of cheap goods to the United States. But Japan also produced Nobel laureates one after another after the war. Its first Nobel laureate was the physicist Hideki Yukawa, a homegrown scholar who as a child recited the Confucian Four Books and Five Classics with his grandfather and completed his entire education, from bachelor's degree to doctorate, in Japan. China, by contrast, did not produce its first Nobel laureate without a Western academic background until 2015, when Tu Youyou won for discovering artemisinin, the antimalarial drug. Yet by 2015, Japan was already the country outside Europe and North America with the most Nobel laureates, including three American-based winners who had themselves received their entire education, from bachelor's to doctorate, in Japan. In other words, Japan's transformation was never simply a matter of exporting large volumes of goods to America—it rested on the substantial technological and educational foundation Japan had built up ever since the Meiji Restoration. Among the Four Asian Tigers, Taiwan and South Korea upgraded both their technology and their culture even as they democratized. Taiwan is a recognized semiconductor powerhouse, and South Korea is its rival in this field; semiconductor foundry work demands intensive technological investment and cannot be achieved through copying alone. South Korea's cultural exports have also been remarkably successful—from Squid Game to Culinary Class Wars sweeping the globe, one can see just how formidable South Korean soft power has become, and this soft power only emerged after South Korea's democratization. As for Singapore and Hong Kong, both common-law jurisdictions, they moved early toward becoming financial centers, each underpinned by the commercial and rule-of-law institutions the British left behind—something China never had. In essence, China's rise rested solely on cheap labor, while its soft power in science, the arts, and the rule of law never advanced at all under Communist Party rule. So once China's relationship with the West broke down completely, China was left with no alternative economic foundation whatsoever. Hong Kong's economy collapsed right along with it, because China thoroughly destroyed Hong Kong's rule of law and freedoms, stripping it of the basic functions of a financial center. Unable to function as a financial hub, with no cheap labor to offer, and unable to trade with the West, it is entirely unsurprising that Hong Kong's economy has run into a dead end. The Collapse of Core Values Has Doomed Hong Kong’s Status as an International Financial Center Cyclical economic problems can be managed with macroeconomic policy tools, but structural problems cannot be cured at all without the right remedy—just as a common cold can be treated with over-the-counter medicine, while something like heart disease or cancer requires a specialist, surgery, chemotherapy, or targeted therapy, none of which is guaranteed to succeed. Xi Jinping refuses to change course, insisting on treating major structural ailments with cold medicine, and the result of this denial is that the illness deepens by the day while every rescue plan grows less effective by the day. It is entirely reasonable that foreign capital is fleeing en masse, since everyone knows that no one within the CCP can stop Xi Jinping from acting recklessly. And as capital outflows accelerate and the West sources more of its goods from other countries, it will become ever harder for China to return to its former glory—it may well be headed for more than a decade of turmoil.

An Incompetent Ruler with No Checks on His Power Drags China’s Economy into the Abyss Under a political system like China's, with no checks or balances whatsoever, there is no one able to restrain an incompetent ruler's misrule, so the moment such a ruler emerges, the country is bound to plunge into an abyss. Wise rulers are rare, but incompetent ones find it all too easy to claim the throne. That every rescue plan has failed one after another is simply the expected outcome, and there is no reason to hold out any hope for whatever "rescue measures" come next.