Why China’s Reputation for Long-Range Planning is Exaggerated

As Americans confront a long-term contest for global influence against a rising China, one common source of worry is China’s supposed superior capacity for long-range planning over that of our own national leadership.

According to former U.S. Secretary of State Henry Kissinger, China’s authoritarian leaders are masters of long-range strategic planning informed by timeless principles derived from China’s rich history and culture. China expert Michael Pillsbury — reportedly an influential outside adviser to President Donald Trump — goes so far as to claim that China’s leadership follows a secret century-long plan for achieving global dominance by 2049.

The vision of American politicians, meanwhile, extends no further than the next election while corporate leaders are at the mercy of investor responses to quarterly stockholder reports. America’s twenty-four hour news cycle forces leaders into reactive mode and provides little incentive for long-term thinking.

Yet this contrast is wildly off-base. China’s reputation for wise long-range planning is vastly overrated. Over and over, the Chinese Communist Party has prioritized near-term economic growth and political stability even when doing so produced predictably negative long-term consequences. Three examples serve to illustrate this point.

Population Policy

China’s one child policy, adopted in 1979, produced a three-decade demographic sweet-spot. The growing workforce of the 1980s and 1990s supported unusually small cohorts of young and old. In other words, China enjoyed an age dependency ratio highly favorable for economic growth.

Yet even without considering the doubtful ethics of such a draconian policy, Beijing’s approach to managing overpopulation set China on the path toward an approaching demographic time bomb. The youth cohorts entering the workforce are too small to replace the much larger cohorts now reaching retirement age. As a result, China’s workforce has entered a period of steep decline. Fewer workers will be called upon to support a growing number of elderly Chinese. The average age of the workforce will also rise rapidly and indeed will exceed that of the United States by mid-century.

In a society with strong cultural biases favoring males, the one child policy also prompted parents to employ illegal sex-selective abortion to rid themselves of female fetuses. As a result, China has a highly skewed sex ratio of males to females. Tens of millions of low-status males face bleak marriage prospects, rendering them ripe for involvement in escalating social unrest.

Having rigidly stuck with its questionable one-child policy for far too long, Beijing’s recent loosening will do little to alter the demographic challenges ahead.

Environmental Policy

Likewise, the Chinese leadership’s long-pursued policy of sacrificing the environmental quality of the nation’s water, air and land in favor of rapid economic growth similarly illustrates Beijing’s preference given to short-term over long-term considerations in planning. For decades, China’s conscious choice to ignore negative environmental externalities artificially boosted growth figures while hiding the clean-up costs and long-term health impacts that must now be borne.

As growing popular anger over air and water pollution became a source of political risk to the Chinese Communist Party, Beijing launched an increasingly aggressive anti-pollution campaign over the past decade. Yet restructuring the economy out of dirty industries and cleaning up the sky-high levels of accumulated pollution from past decades is expensive. Anti-pollution spending during the current five-year economic plan amounts to $1 trillion. The stark choices China now faces could have been softened through a more prudent approach to balancing growth with the environment in the past.

Economic Policy

Finally, a massive stimulus program in 2008 as a response to the global financial crisis allowed China to avoid a serious economic downturn at the time, but also set China on a path wherein the economy became dependent upon continual credit expansion. Overall public and private debt in China rose from 162% of GDP in 2008 to 266% of GDP in 2017 — the highest of any major economy in the world. As a result, massive bailouts will be required to manage the unsustainable debt levels of state-owned enterprises. In an effort to boost employment, China has vastly over-invested in both infrastructure and heavy industries such as steel and autos, with the result that many factories operate at a fraction of their capacity. Indeed, the amount of investment needed to produce an additional unit of GDP growth has doubled since the early 2000s.

Is Authoritarianism Superior at Planning?

There are other examples. The overly rapid expansion of higher education has compromised quality and produced large numbers of graduates working at low-level jobs for which they are overqualified. CCP General Secretary Xi Jinping has reversed the relative liberalization that occurred under his predecessors, with the result that the cost of internal security is rising while the flow of information necessary for social and economic innovation is declining.

China’s past successes, impressive as they undoubtedly are, may not be a good indicator of what is to come. Many of the plans that stimulated growth and secured political stability during recent decades focused on short- and medium-term results while ignoring long-term costs that are now becoming apparent.

The belief that Chinese leaders have greater freedom to think and plan long-term than their American counterparts is rooted in the view that democracy is more a hindrance than an asset. Yet while American politicians worry about reelection, they seldom doubt that the public considers the basic institutions of democracy legitimate. Not so for Communist Party leaders, which is why they respond so vigorously to any hint of unrest and why they place priority on short-term growth even when such policies produce long-run pain.

Moreover, democracy and markets both provide feedback mechanisms that signal when governments or firms are on the wrong path, allowing corrective action to take place. Once a CCP policy becomes entrenched — such as the one-child policy, or environmentally destructive economic practices, or over-investment in infrastructure and excessive reliance upon debt — feedback signals are too muted and mechanisms of accountability too weak to ensure a change in course. These shortcomings partly explain why so few of the economic reforms approved at the 18th Communist Party Congress of 2012 have actually been implemented thus far.

None of this is to deny that long-range planning faces a different and also powerful set of obstacles in the United States. Even so, however, we should not be misled by the erroneous notion that China possesses some unique successful capacity for vision and long-range planning. Rather than look with longing upon China’s authoritarian model, we should seek ways to enhance the capacity for strategic, long-term thinking within the context of our own democratic institutions.