Zhang Huyue: Governance reform is the key to revitalizing the Chinese economy

During the economic slowdown, the situation often becomes worse before the improvement. The Chinese government has launched the largest economic stimulus plan since the end of September, which proves this.

The announcement of the Chinese government surprised many people, but the rolling of policies is not new for China.In 2021, the regulatory strikes on the Internet industry, the end of the zero policy of the crown disease in 2022, and the changes in family planning regulations since 2014 have been similar to sharp turns.

In the recently published steel wire: How to supervise the science and technology giant and the governance economy (High Wire: How China Regulaters Big Tech and Governs ITS Economy), I interpret the three decisive characteristics of Chinese policy formulation: the level system, fluctuationsSex and vulnerability.Because China's central centralized decision -making structure is developed from top -down (hierarchical) instructions, it will cause various sudden and violent policy changes; policies often follow the cyclical model, often between tightening and relaxation between tightening and relaxationVolatility (volatility); at the same time, even if the starting point is good, the policies often may take a long time to appear to appear for a long time. When the official realizes that when we realize it, you often pay a high price to reverse the situation (Vulnerability).

China has a slow response to the increasingly urgent deflation threat, which is fully in line with this model.Although various warning signals have been obvious for more than a year, for some reasonable reasons, the Chinese government has been reluctant to take bold measures to restart economic growth.The most noteworthy is that the official is keenly aware that it is necessary to get rid of the traditional dependence of the economy's investment in real estate and infrastructure investment, and turn to a more sustainable source of growth such as high -tech innovation.

However, China is still trying to get rid of the influence of large -scale stimulus policies in 2008, especially the excessive debt accumulated by local governments and state -owned enterprises. This trend has pushed China to the critical threshold of systematic financial risks a few years ago.In addition, China's highest leadership is concerned about the growth of consumer -driven types, which may make it a welfare country, which is a waste and inefficient in their opinion, and does not meet their long -term vision for China as a self -reliant industry and technology.

Therefore, the Chinese government did not obey the appeal to take bold stimulus measures, but only took some mild measures to prevent the economic decline.Unsurprisingly, these measures have had little effect on solving the threat of shrinkage.At the same time, policy makers focus on maintaining fiscal discipline while continuing to invest in production. Even if this accelerates the overcapacity of solar panels and electric vehicles, it will exacerbate trade tensions with other parts of the world.

Now that China is facing a Japanese -style "lost ten years" characterized by shrinkage and stagnation.Economists warn that the longer the shrinking time, the higher the cost of reversing this situation.Fortunately, the Chinese leader seemed to have finally heard it: the government suddenly turned 180 degrees to fully mobilize currency and fiscal tools to save the crumbling economy.

This is the right measure, because what China needs is currently stimulating the economy.But this is not risky.The stock market responded warmly to the stimulus measures, setting the best weekly performance since 2008.In view of the fact that investors expect more fiscal measures to support the economy, speculation is rampant.

Now that people are worried about the sudden injection of funds in the economy, it may cause the stock market bubble to launch hidden dangers for the next financial crisis.If this risk becomes a reality, Chinese policy makers will once again face a crisis management situation of mouse -like mouse -just extinguishing a crisis here, and another crisis over there is an emergence.

In order to avoid this result, China must take measures to minimize the accident and consequences brought by policy intervention, such as establishing a real -time and accurate feedback mechanism in order to conduct mid -term corrections before foam formation and crisis explosion.More importantly, China must break the habit of habits and dramatic policy changes based on top -to -bottom instructions, and return to the effective approach to the past: gradual reforms based on decentralized policy tests.

This experiment is the first 30 years of the Chinese market reform process. At that time, the two -digit double -digit domestic product (GDP) increased by the economy at that time.By giving local official power, using local knowledge and testing new ideas, the central government has achieved endless policy innovation.But in recent years, it has rely more and more comprehensive decisions that are not conducive to economy.

Bold stimulus measures may win time for China, but cannot bring lasting prosperity.To this end, China must adopt a decentralized governance method that has promoted its rise.This means restoring the autonomy of local governments and encouraging the bottom -up measures, so that local officials can test solutions suitable for local conditions.The question is whether Beijing is willing to abandon any control to ensure long -term control of the economy.

The author is a professor of law at the University of Southern California

English Original: Governance Reform is Key to Reviving China ’s Economy