China’s Fear of Failure & What is to be done? @GordonGChang, @TheDaily Beast. Weiying Zhang. Michael Aronstein.,

Oct 06, 2016, 04:00 AM

10-05-2016 (Photo: The Lujiazui financial district of Pudong, Shanghai, the financial and commercial hub of modern China ) Twitter: @BatchelorShow

China’s Fear of Failure & What is to be done? @GordonGChang, @TheDaily Beast. Weiying Zhang ( Michael Aronstein, Marketfield Asset Management

“…It's a rare afternoon in the Chinese capital when smog hasn't blocked the skies, and one of China's most famous economists is in a sanguine mood. The economy is in trouble as the Communist Party heads for a once-in-a-decade transfer of power while prosecuting its former golden boy, Bo Xilai, on criminal charges. Worried investors want signs that Beijing remains committed to growth—and the sign they'd most like to see is a big Keynesian stimulus. Zhang Weiying would say that they're wrong to panic. The economic slowdown, he calmly says over tea, is actually good news that "makes the government think we need to change"—toward reform and away from priming the pump. We aren't all Keynesians now in China, he insists.

Three years ago, Keynesianism was official policy. The 2008 financial crisis had Beijing gloating over the failure of the free-market "Washington Consensus" and touting the "China Model" of government intervention. Keynesianism fit the statist zeitgeist and Beijing then suffered an export slump, so the government allocated $3.5 trillion—or about 50% of gross domestic product—in bank loans and direct spending.