At NEWSMAX: “Big Trouble in Little China”

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The Chinese economy is running out of steam. Instead of tinkering with or pumping more fuel into an outdated growth engine, it needs to convert to a better engine.

Limits to China’s state-run capitalism have become evident in the last year. GDP growth has recently slowed to 7 percent, which is the lowest in six years, in spite of monetary and fiscal stimulus, unreliable and sometimes manipulated economic data and China’s lack of transparency. The weakening global economy means that China’s reliance on its exports will not lift their economy anytime soon. Coupled with lackluster domestic demand and a bursting real estate bubble give little hope of a quick turnaround.

Slowing economic growth jeopardizes the informal social contract between the Chinese government and its people. The Chinese people were willing to put up with authoritarian governance as long as their economy grew enough so their lot in life would improve.

But as jobs and income slow down, Chinese citizens become less tolerant toward their government. Daily hardships like food safety, income disparity, unaffordable housing, ethnic tensions and shoddy goods and services go from sufferable to insufferable. Corruption and cronyism pervade every level of society. Pollution is out of control and is having a devastating long-term impact on the environment. The average citizen is getting restless.

President Xi Jinping realizes this. He has established numerous reform task forces and is pushing for more economic stimulus to buy time for his reforms to be implemented. More importantly, he knows that the Communist Party is a primary tool of a communist state for any meaningful reform, and therefore he has made tackling its corruption the foundation of his efforts.

But what he does not realize is that there are limits to Frankenstein’s monster named state-run capitalism. What propelled China from negative GDP to robust economic growth was migrating from a state-run economy with experiments in freer markets to state-run capitalism.

Now China can only progress economically by migrating toward freer markets. That means private ownership of property, prices that are set freely by the forces of supply and demand and the rule of law. It will not progress if it continues to tinker with refining an outdated growth engine.

But without a moral code of conduct, even free market capitalism has limits. As Alexis de Tocqueville noted, religion, specifically Christianity and Judaism, plays a critical moral role preventing democracy from devolving into selfish individualism, consumerism and the establishment of a despotic nanny state. America is still coasting on 250 years of universal consent to religious freedom while China has no such tradition.

The interdependent world economy cannot afford a stagnant China. The United States must re-assert its world leadership and work with China to create freer markets and religious freedom for all to succeed.

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