Here’s a letter to the Wall Street Journal.
Editor:
Last week you published Ram Charan’s warning that Beijing is ingeniously turning China’s economy into an indomitable economic colossus by creating huge excess capacity in “key” industries (“China Seeks Power, Not Only Trade,” January 2).
This week, your columnist Joseph Sternberg reports that China’s economy is increasingly suffering “zombification” (“China Drifts Closer to Its Own Lost Decade,” January 9). “There’s reason,” he writes, “to suspect corporate zombies are proliferating. By one recent estimate, among service-oriented companies the proportion of total corporate assets held by firms that don’t earn enough to cover interest payments has risen to 17%, from around 8% in 2019.”
If Mr. Sternberg is right, Mr. Charan is wrong. And Mr. Sternberg surely is right. Governments that tie-up – as Beijing does, with subsidies and other special privileges – ever-larger amounts of their economies’ resources in unproductive industries grow poorer and weaker, not richer and stronger. We Americans, therefore, should reject Mr. Charan’s counsel to create a “Department of Manufacturing,” which would be a U.S. government boondoggle destined to introduce economic zombification on this side of the Pacific – and thus reduce the cost to Beijing of its own zombification.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
