Hello everyone!
The events 7 October are hard to calculate, but questions are already asked of Beijing’s middle of the road stance. That’s matter for later discussion, however: we need to wrap up Liang Jing’s definition of the PRC Ponzi scheme. For latecomers, parts 1 and 2 of his three-part op-ed are here and here.
The following is my translation of The China Model and Ponzi schemes revisited (Part 3). Available in parallel text format here.
Something to do with tulips…
Liang Jing, "The China Model and Ponzi schemes revisited (Part 3)”, Ziyou Yazhou diantai, 19 September 2023 [梁京:“再议中国模式与庞氏骗局 (下)”,自由亚洲电台,2023年9月 19日 (in Chinese).].
What are the China-led Ponzi scheme’s historical consequences? It’s too early to make a conclusion, but we have clearly seen that the human tragedies and comedies it created are unprecedented in scale, huge in stakes, and profound in impact. Its scale is, first of all, not a function of the PRC’s huge population and economy, but because it has for many years insisted on using its huge trade surplus to buy US Treasury bonds, creating a low-interest environment in the US that lasting for years, artificially depressing financing costs of the entire international capital market.
Neither the US government nor Wall Street could withstand the huge temptation that led to Wall Street's ‘Lehman Brothers moment’ and the fiscal crisis caused by US local governments’ massive borrowings. Historians will long argue over what the world and China would be like today had the US elite not turned to ‘Red China’ to save capitalism when the US financial crisis broke out in 2008, but instead decided to reform. Would the PRC Ponzi scheme have become what it is today? What is certain is that Wen Jiabao's CN¥4 tn bailout of the US not only took the scheme to a new level, but took the greed and imperial ambitions of powerful PRC elites with it. Hence, if we ask about historical responsibility for the Ponzi scheme, the US cannot escape some.
To grasp the consequences of a Ponzi scheme, the basic idea is to take stock of the scale of the asset bubble formed, and the magnitude and duration of its negative effects. Clearly, the greater the bubble’s scale, the greater its impact on the entire social and moral order. The duration of the damage has much do with the assets’ physical form. Relative to the Dutch economy at that time, the scale of the tulip asset bubble was not small, but its long-term effects were not comparable to those of the PRC real estate mania, whose Ponzi scheme is centred on real estate financing. Not only vast in scale, its outcomes are extremely long-term. As well as paying huge resource, environmental and social costs, its most serious consequence is to increase the cost of population reproduction all round. Coupled with the massive outflow of talents and financial assets, the PRC faces a demographic and social crisis lasting generations into the future. Many have become aware of this grim prospect.
This process, it will be said, is not without a silver lining. After all, so many people have received cash in hand, enjoying not only the conveniences of ‘modernisation, but indeed a sense of being Chinese people in the modern world. The dilemmas of modernity are not unique to China. The fact that its scheme has finally been ‘disclosed’ does not mean that this great nation will cease to exist, nor does it portend the end of mankind.
There is no point, I concur, in being depressed or pessimistic at this historic turning point. What's more, the end of a Ponzi scheme means there are new chances for choice. In this sense, an ‘asset bubble’ created by the PRC Ponzi scheme will be beneficial to it in the future. This is the recently exposed ‘nuclear deterrent capability’ bubble. What annoys Xi Jinping most this year is not, I would argue, that the PRC economy is not doing well, but that the US has made him grasp that his nuclear weapons are actually just decorations. The wealthy generals of the Rocket Force have in other words collectively deceived him. This incident shows us that China’s political culture, which is strong in self-deception, can create both great tragedies like COVID and comedies like the Rocket Army.
The PRC Ponzi scheme has destroyed Xi’s and many Chinese people's dreams of being a major power, but it does not mean that there will be no opportunity to invent another self-destructive ‘great power dream’. To avoid this possible disaster, PRC thinkers, together with those of other countries, should learn lessons from the underlying causes of its Ponzi scheme. For this reason, it is quite insufficient just subject it to moral criticism and motivation analysis. Facing the choice of the future, it is necessary to create a new historical narrative of China's relationship with the world.