The central government wrongly used the upswing in stock markets as a proxy for real reforms, says associate professor Victor Shih in the Washington Post. Until those shares came down and created mayhem in China and globally. “”In dictatorships, when things are going well, nobody wants to end the party.”
The Washington Post:
“The entire policy establishment was thinking they had found the magic bullet for corporate finance in China and not really thinking about where the money comes from,” … said (Victor Shih, associate professor at the University of California at San Diego’s School of Global Policy and Strategy).
For Shih, the sorry episode also reflected a more fundamental flaw in China’s system, especially with power so centered in one man.
“In dictatorships, when things are going well, nobody wants to end the party,” he said. “When anything goes well in China, people can attribute that to the top leader. But it would be very difficult for anyone to come and say, ‘Things are not going well; it’s a bubble and it’s about to crash.'”
“Had power been a bit more decentralized, people would have come to say, ‘Lets end the party.’ There would be less fear of offending any particular leader.”
Xi’s centralization of power, some experts and foreign business leaders say, has also undercut a strength of the Chinese system — decision-making by consensus, in which policy was implemented only after careful consultation and cautious experimentation. Today, they say, policy seems less considered, more haphazard.
Are you interested in more stories by Victor Shih? Do check out this list.