The Center for Strategic and International Studies (CSIS) sponsored a panel discussing “Economic Policy in Today's China: Between Growth, Equity and Security” during the first Big Data China Conference.

The event, sponsored by the CSIS, according to its website, and Stanford University's Center on China's Economy and Institutions (SCCEI), featured the university’s Scott Roselle as moderator. Panelists included University of Toronto professor Loren Brandt, Peterson Institute for International Economics Fellow Mary Lovely, and Daniel Rosen, co-founder of the Rhodium Group.

Brandt, according to the University of Toronto website, has focused his research on the economic development and history and economy of China, and has had his work published by a number of outlets, including American Economic Review, Journal of Economic Literature, Econometrica and the Journal of Development.

According to the Peterson Institute for International Economics, Lovely also serves as the Library of Congress chairperson in US-China Relations at the Kluge Center, and previously was a professor at the Maxwell School of Citizenship and Public Affairs at Syracuse for more than a decade. She studies foreign direct investment policies and trade flows in China, including the impact of Chinese tariff cuts on manufacturing companies.

For more than 25 years, Rosen has offered analysis of China’s economy, according to the Rhodium Group, and he serves as leader of the company’s efforts tied to China, Asia and India. He also serves as an associate professor at Columbia University.

During the event, the panelists discussed security and equity, as well as implications in China and what sectors in China’s economy will be the key drivers of growth.

“With regards to security and equity eclipsing growth, on the surface it looks to be this way, but I am going to argue that it is really misleading,” Brandt said. “There have always been tradeoffs. Take a look at the last three or four decades, there have been tradeoffs between economic growths and between the competing objectives of the state and the party that are tied to China’s political economy."

Since the onset of reform, China’s economy has had a lot of inefficiency, which Brandt said is the result of China’s efforts to also pursue noneconomic objectives that get in the way of economic policy. To sort out the implications, it is important to know where the economy of China is.

“Over the 10- or 15-year period before COVID, there was a marked slowdown,” Brandt said. “We saw an economy that had gone from about 8% growth per year to an economy growing at about 4% a year or less.”

Brandt said he remains puzzled by the drop in productivity in China’s economy, where wages are lower than in advanced economies.

“There was enormous potential for China,” he said, adding that long-term policy choices are driving growth in productivity and growth that have not played out the way the Chinese expected.

“Being less not more open was a policy they thought was necessary to escape the middle income trap,” he said.

Brandt said he could see China doubling down on key sectors of the economy, including technology, and more top-down measures

“None of this is going to help the productivity,” he said. “None of this is going to help the growth any time soon”

Lovely agreed with Brandt, noting that policies that have hampered growth predate President Xi Jinping amid efforts to escape middle-income growth.

“I think this is something that has led them to believe that intervention is the way to go, and certain types of growth-enhancing policies that would promote growth, competition and transformation had to be slowed down or diminished,” she said. “I wouldn’t say eliminated, because that is too strong of a word.”

Lovely also said the West has been waiting a long time for the Chinese economy to shift from export or investment-led growth to consumption-led growth.

“We should keep waiting,” she said. “I don’t see this happening anytime soon.”

Economists have been waiting for this shift as the Chinese people pressure the government for a move in this direction. It is not likely the government will move in this direction anytime soon.

When it comes to tech investment and security, Lovely noted that the U.S. has taken the gloves off where China is concerned.

One driver to growth in China, according to Lovely, could be a post-COVID consumption boom. The country also could double down on net exports as a growth area, she concluded.

Rosen noted that it is hard to say that China has achieved greater security and equity over efficiency.

“I don’t think we can say that China has acquired greater security by turning away from basic market reform work that needed to be done during the Xi Jinping years,” he said. “China has not acquired greater equity for its people, or a more common prosperity at all.”

Rosen noted that China has 900 million people waiting for their turn, but without economic growth, stability is in a precarious situation.

Rosen also said changes aren’t being made, and growth will be hampered, though it could be self-correcting. He said China is overinvested in property and is underinvested in human capital.

“They need to invest in seawalls to keep Shanghai from slipping underwater and becoming uninhabitable,” he said.

Rosen said he doesn’t see China investing in infrastructure in any meaningful way that could drive the economic correction.