There’s been a big puzzle about why China is not growing as everyone expected. After all, they had been locked down, they were reopening, consumers are supposed to have some $2 trillion extra in their bank accounts waiting to spend because they hadn’t been allowed to spend. 

Sounds familiar to the U.S., but maybe more so because it’s much bigger as a share of their economy. But it’s not occurring. The boom is disappointing. As a result, global commodity prices are falling, the People’s Bank of China is cutting interest rates to stimulate the economy, but government has announced various schemes as well. 

Instead, business confidence and consumer confidence are dropping fast. Now, in reality, this shouldn’t be a surprise to us. I’m going to use a politically incorrect reason. I’m going to call it communism. It just doesn’t handle transitions very well. It’s a stodgy state. Decisions are made by a very few number of people. 

Now COVID and the lockdowns caused all kinds of problems here. Because of the nature of their system, they were 10 times bigger in China. 

Let’s start with the supply chain. We know here that supply chain is actually still getting back to normal. It’s largely back but not completely. It took a long time. And we learned that supply chains are complicated spiderwebs. Now in a market system, the entire market is geared toward trying to undo those supply chain bottlenecks. That’s what entrepreneurs and businessmen do. In China, instead, they tried to do it from the top down. And they made things worse. For example, they had, felt threatened by some of the big tech executives in their country. A number of them met untimely deaths, falling off the tops of buildings, for example. And even the very well known Jack Ma, who headed Alibaba, basically was disappeared for two years. He wasn’t apparently harmed, but you never saw him in public. And in the meantime, various parts of the Chinese state took half of his companies. 

Well, that doesn’t make your supply chain work any better. It’s entrepreneurs who run the country. And I think they’re belatedly waking up to that. And some of Jack Ma’s associates are now put back in charge of Alibaba. But the supply chain problems are much worse in China because of their own internal system. 

Second, the lockdowns were more extreme in China. In the US, we know that closing schools harmed kids, psychologically, we call it long COVID for some adults. Labor force participation is down, depression is up. And we have the option for internal migration. If you got sick of being in high lockdown states, think New York, Michigan, California, you move to low lockdown states like Florida and Texas and millions did. Not an option in China. Instead, in China, you were literally locked in your apartment. The front door to your apartment building was gated shot, you couldn’t go out. Sometimes people ran out of food. In addition, the apartments there are very, very tiny. So things were not handled well. The level of depression was much higher in China. Some private estimates are that half of the Chinese population suffers from some degree of depression, and they don’t have the infrastructure here to handle it that we do. 

Finally, it’s their own propaganda. Who is the cause of all the problems in China? Well, the Chinese government says it’s the U.S. — that we’re trying to stifle China. And maybe to some extent we are because they’ve been stealing intellectual property and what have you, but because they look around and they see the outside world trying to get them, that only enhances the It’s  in China, keeping spending by both down. Now the Chinese are trying good old-fashioned monetary and fiscal policy to try and fix this problem. Good luck to them. These are problems they simply can’t fix. This is Larry Lindsey for Straight Arrow News.