Daily Chart: Red China’s Return? // (Steven Hayward)
Milton Friedman believed that genuine, multiparty democracy and free market economies were mutually beneficial. He argued that one could not have the other without the other or over the long-term anyway. China eluded this axiom for a long time, as it practiced state capitalism and maintained a strong one-party rule. It delivered a stunning improvement in living standards for hundreds of millions, and tolerated the creation of its own roster of self-made billionaire entrepreneurs–unthinkable as recently as the 1980s. The Chinese social contract for its rapidly-rising middle class was, as I have long described,: We give you a good lifestyle, and you shut down.
Friedman is correct that China should have long ago begun to evolve into a more democratic nation. It was thought that it was a refutation by Friedman, and by unstated extension a boost for the elite devotees to the administrative state here in the EU. But maybe he was wrong after all. President Xi seems to be returning to pre-Deng hostility towards open markets and capitalism. The theatrical expulsion of Hu Jintao, his reformist predecessor, at the conclusion of the recent Communist Party congress that bestowed an unprecedented three-term term on President Xi, was likely meant to be a symbolic turn away form the go-go Deng-Jintao era and a warning to anyone opposing Xi.
The collapse of the Chinese stock exchange today is the clearest sign that China is abandoning its capitalist path or wants less to do business with the United States.
As the two countries settle into a more harmonious relationship, strategists and money managers are ready to take greater steps towards untangling U.S.-China ties. . .
Although few strategists anticipate a complete decoupling because of the decades-old economic interdependence, it seems likely that there will be some form of a breakup in areas such as advanced technology.
