1/8 China' private secret is suffering. Among other things, "“China...
Michael Pettis@michaelxpettis
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Sep 17, 2024
~2 min read
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China' private secret is suffering. Among other things, "“China used to be the best VC destination in the world after the US,” says one Beijing-based executive, but “the industry has just died before our eyes. The entrepreneurial spirit is dead.”
ft.com/content/1e9e75…
China' private secret is suffering. Among other things, "“China used to be the best VC destination in the world after the US,” says one Beijing-based executive, but “the industry has just died before our eyes. The entrepreneurial spirit is dead.”
ft.com/content/1e9e75…
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The article goes on to note that "in 2018, at the height of VC investment, 51,302 start-ups were founded in China, according to data provider IT Judi. By 2023, that figure had collapsed to 1,202 and is on track to be even lower this year."
The article goes on to note that "in 2018, at the height of VC investment, 51,302 start-ups were founded in China, according to data provider IT Judi. By 2023, that figure had collapsed to 1,202 and is on track to be even lower this year."
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While it has been clear for years that the role of the private sector in the economy has contracted relative to the role of the public sector, if you want to understand why China's adjustment has been, and will continue to be, so difficult, it is important to understand why this has happened.
While it has been clear for years that the role of the private sector in the economy has contracted relative to the role of the public sector, if you want to understand why China's adjustment has been, and will continue to be, so difficult, it is important to understand why this has happened.
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As Beijing set GDP growth targets that were increasingly unrealistic during the past 15 years, the only way to achieve these targets required relying on increasingly non-productive investment, and this meant shifting economic activity from the private sector, which...
As Beijing set GDP growth targets that were increasingly unrealistic during the past 15 years, the only way to achieve these targets required relying on increasingly non-productive investment, and this meant shifting economic activity from the private sector, which...
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necessarily operated under hard-budget constraints, either to the public sector, which usually didn’t, or to large entities whose access to credit was managed by the regulators, and so who also largely evaded hard-budget constraints.
foreignaffairs.com/podcasts/who-k…
necessarily operated under hard-budget constraints, either to the public sector, which usually didn’t, or to large entities whose access to credit was managed by the regulators, and so who also largely evaded hard-budget constraints.
foreignaffairs.com/podcasts/who-k…
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The contraction of the private sector, in other words, was the inevitable consequence of China’s deep imbalances and difficult adjustment, and not the cause. This means that the solution for China is not to “re-energize” the private sector, as so many economists insist.
The contraction of the private sector, in other words, was the inevitable consequence of China’s deep imbalances and difficult adjustment, and not the cause. This means that the solution for China is not to “re-energize” the private sector, as so many economists insist.
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It is instead to get on with rebalancing the economy in the least painful way possible, although (perhaps inevitably) what is least painful economically is unlikely to be what is least painful politically. The point is that until a large share of the country’s resources (at…
It is instead to get on with rebalancing the economy in the least painful way possible, although (perhaps inevitably) what is least painful economically is unlikely to be what is least painful politically. The point is that until a large share of the country’s resources (at…
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least 10 percentage points of GDP) are shifted from government to households, the economy will struggle, the private sector will remain weak, and economists and the business press will continue to blame China’s economic slowdown on Beijing’s clampdown on the private sector.
least 10 percentage points of GDP) are shifted from government to households, the economy will struggle, the private sector will remain weak, and economists and the business press will continue to blame China’s economic slowdown on Beijing’s clampdown on the private sector.
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Apologies. By "private secret" of course I meant "private sector".