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The two China policies

Summary:
The Economist has an article showing a dramatic difference in economic growth between northern and southern China: There has been some migration to southern China, but nowhere near enough to fully explain this divergence.  The southern provinces really have done better, even in per capita terms. The Economist provides a number of explanations for this gap, but barely even alludes to the most important; southern China is considerably more capitalist than northern China.  That oversight would not have occurred in the Economist I read when I was young.  Someone should revive the Far Eastern Economic Review. PS.  Of course there are more than two Chinas.  Taiwan is even more capitalist than the southern mainland, and is even richer.  Hong Kong is even more capitalist

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The Economist has an article showing a dramatic difference in economic growth between northern and southern China:

The two China policies

There has been some migration to southern China, but nowhere near enough to fully explain this divergence.  The southern provinces really have done better, even in per capita terms.

The Economist provides a number of explanations for this gap, but barely even alludes to the most important; southern China is considerably more capitalist than northern China.  That oversight would not have occurred in the Economist I read when I was young.  Someone should revive the Far Eastern Economic Review.

PS.  Of course there are more than two Chinas.  Taiwan is even more capitalist than the southern mainland, and is even richer.  Hong Kong is even more capitalist than Taiwan, and is even richer.  Funny how that works.

PPS.  I said, “barely even alludes to” as this is the only reference to free market policies in the article:

In 2013, the peak of China’s building frenzy, investment in assets such as roads and factories reached an eye-watering 66% of gdp in the north versus 51% in the south. Southern officials have been more hands-off.

PPPS.  I see a lot of talk about China’s “industrial policy”.  FWIW, there’s more industrial policy in northern China than in the south.

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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