Keyju Jin: China from within: Myths and realities in a new era

By Joel Wong

In this video, Dr. Keyu Jin provides an insider’s view of the Chinese economy, debunking common myths while addressing the current demand deficit and unexpected technological advancements. She emphasizes the importance of local government initiatives, termed the “Mayor Economy,” in tackling future challenges.

The sustainability of China’s “Mayor Economy” is complex. Jin discusses how this decentralized model, where local mayors drive economic growth, was effective in the past but now faces significant hurdles. Local governments are burdened by substantial debt, which threatens the model’s viability and may lead to distorted behaviors that impede growth. Additionally, there is a shift in focus from economic expansion to political loyalty and social stability, which further affects the effectiveness of local initiatives. Jin concludes that the model’s sustainability hinges on whether the government can resolve the debt crisis and rekindle local officials’ willingness to take economic risks.

Regarding China’s demand deficit, the video indicates that the current economic slowdown is largely due to lingering pandemic effects, a faltering real estate sector, and stricter regulations that have dampened investor confidence. While the video does not provide a definitive answer on overcoming this deficit, Jin suggests that fostering innovation and achieving domestic technological reliance are essential for long-term growth and avoiding the middle-income trap. He identifies underutilized labor and untapped consumer potential as areas for significant growth, implying that the right reforms could help overcome the demand deficit.

Youth’s Role in China’s Future – Jin points out that China’s younger generation, born after the 1980s and 1990s, embodies both hope and challenges. They are described as more socially conscious and less risk-averse compared to previous generations. However, a considerable skills mismatch exists, with high youth unemployment and a lack of alignment between graduates’ skills and available manufacturing jobs. This gap could threaten social stability. The government recognizes this issue, and addressing the economic landscape to create jobs that align with youth skills will be crucial for harnessing their potential.

Key Takeaways:

China’s economy is grappling with a genuine demand deficit, worsened by the pandemic and declining real estate confidence.
Despite the slowdown, China excels in 35 out of 44 cutting-edge technologies, highlighting its innovative capacity.
The “mayor economy” plays a vital role in China’s growth, though local governments face challenges balancing economic and political priorities.
Significant economic disparities persist, with many citizens living below the middle-income threshold, which hampers overall growth.
The financial system is heavily bank-dependent, limiting private sector access to capital.
The youth demographic presents both opportunities and challenges, with a skills mismatch in the job market posing risks to social stability.

For a deeper understanding of these dynamics, further research into China’s economic policies and forecasts is recommended.