The pinnacle of Chinese philosophy is Taoism, which includes the concept of wuwei, basically meaning “action through inaction.” That is, doing nothing is in itself an act that has an impact on a situation just as doing something does. There are many examples of a wuwei approach being taken by the Center in modern Chinese history, including the way Zhu Rongji handled the SOE crisis in the late 1990s and early 2000s, with millions of workers getting laid off. The perky economy of the time soaked them up. Today, this week in fact, there is a convergence of bad news about the economy that is making pundits, investors, and government officials around the world ask, where is this going, how will Beijing deal with it and how does it affect everything else?
Two basic choices—do something or do nothing. Each of the problems—shaky property companies, indebted local governments, wobbly parts of the finance sector, slowing consumer spending, sagging share prices, weak RMB etc etc—could conceivably be handled with a stimulus cash injection, but all at once? No. So the pundits seem to be of the collective view that big stimuli just ain’t gonna happen this time. And that leaves wuwei. Basically let things fall and fail and change, deal with isolated bits and muddle through.
If that is how they do it, will things basically remain stable with so many shaky foundational elements? And if not stable, how would that play out? And how much of an impact would a China in a serious economic slump have on the rest of the world? The pundits are less united on this one, with views varying from serious impact to not much. It’s new territory. Could the Center announce new measures to offset the basic problems and restore confidence? It’s hard to conceive of what those measures might be. The solutions to China’s current economic problems are mostly longer term and systemic and require hard decisions to be made with deep consequences, and the Center seems unlikely to bite such a bullet. The overall environment lacks the perkiness of 20 years ago.
It all seems so sudden, but that is the consequence of opacity. China is always fine until suddenly it is not. Anyway, the Beidaihe break for the leadership is over and they must be losing sleep as they try to figure this out. With wuwei for sure being on the agenda. Meanwhile, for what it’s worth, the US economy seems to be doing okay.
Have a good weekend.