Macquarie Research, Is China’s Triumphalism Misplaced?

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Is China’s Triumphalism Misplaced?
Below is the text of my Opinion piece in today’s Wall Street Journal Asia,
reprinted with the Journal’s kind permission:
Is China’s Triumphalism Misplaced?
The much-vaunted mix of authoritarianism and economic reform is under severe
strain.
China's leaders appear more confident than ever that their authoritarian politics
and interventionist economic policies are superior. This is not surprising since
even in the worst months of the global financial crisis, Chinese growth held
above 6%. Meanwhile the Western market economies slumped into deep
recession and are still struggling to regain their footing.
Yet a recent spate of tough economic and political challenges, several directly
resulting from its crisis-period policies, calls into question Beijing's selfcongratulatory
narrative. What's worse, China's essential economic
transformation in the decade ahead will succeed only with further relaxation of
state interference in human affairs, meaning the authoritarians' renewed selfsatisfaction
may come at substantial future cost.
As early as June 2008, before much of the crisis had unfolded, People's Bank of
China Governor Zhou Xiaochuan pointedly told a group of American officials that
Beijing was "no longer learning positive lessons from the U.S.," but rather could
henceforth learn only from Western mistakes. Less subtly, an editorial three
months later in the People's Daily declared the crisis to be no less than "a
manifestation of the dead end of liberalism and the destruction of the myth of
American institutions."
Late last year, another editorial in that same paper scoffed at "Western"
concepts such as multiparty democracy and separation of powers as "ill-suited to
China" and praised the greater effectiveness of China's authoritarian socialism.
Those comments echoed a March 2009 speech by the chairman of China's
National People's Congress admonishing that China "can by no means copy the
Western system."
Such triumphalism is starting to look decidedly hasty. A slew of problems is
emerging, from pernicious inflation to massive new bad debts to broad
dissatisfaction over property market conditions to a surge in corporate
governance and corruption concerns. These suggest not only that Beijing's
command/control response to economic crisis was less successful than first
trumpeted, but that faster liberalization may offer the only path by which China
might avoid the slide to economic "also ran."