China's Xi Jinping Shleps the Piano Past its Destination...and Other Insights on Infinity

I’ve written a couple times about a valuable insight I got from yoga teacher Priscilla: "Don't aim for infinity!".

Students working to achieve a difficult stretch often aim for infinity. That's a big mistake. If you don't aim toward a specific arrival point, you will, over time, wind up overdoing, pushing your body to do things it's not made to do, as you stretch further and further toward infinity like an out-of-control robot.

This truth is expressed in various ways by various cultures. For example, it's a large part of what Buddhists mean by "The Middle Path". But something about Priscilla's construction speaks to me. Don't aim for infinity!

I've taken on many daunting missions/quests in both my private and professional lives. For example, my first big-time writing assignment was a survey for NY Newsday of all the best food beneath the 7 train in Queens. Imagine cataloging the best sand grains on Malibu Beach! But I did it. And Chowhound launched with no startup money and no tech guy (my partner Bob was not a real tech guy, as he'd be first to admit). But that got done, too. Nearly everything I've taken on has been pretty impossible, though I'm certainly not bragging (visualize me, instead, wincing, flinching, ticcing, and desperately trying to control my wildly spasmodic limbs while my eyelids tap out "SOS" in Morse code to no one in particular).

I can assure you that those who take on impossible tasks seldom key in on precise arrival points. They just give it all they've got. All they've got! Tasked with carrying a piano across Manhattan on your back, you wouldn't focus on the exact location in Mrs. Perlmutter's living room where it's to finally be set down. You'd be occupied with hoisting and groaning and plodding and enduring, and quite likely be spotted in the Hudson River, thrashing wildly among the whitecaps with the damned piano still strapped to your back. Hell, you might wind up in New Jersey. Or California. Or Guam. Me, I've shlepped many a piano to Guam!

"But how," you ask, "does this pertain to Chinese macroeconomics?"

China is at a dire crossroads, according to a great, easily-digestible Atlantic article, "The China Model Is Dead" and an equally great/digestible piece from The Economist (with a less grabby title), "China’s Slowing Economy, Seen From Ground Level".

Here's terrific overview from the former:

When China’s free-market reforms were just getting under way in 1980, the country was poorer, per capita, than Ghana or Pakistan. Today, China has an $18 trillion economy capable of devising 5G telecom networks and electric vehicles.

The motor of the China model is investment, and lots of it—into factories, highways, airports, shopping malls, apartment towers, you name it. China was destitute at the outset of its reforms, and much of the new infrastructure was necessary. Better transport systems helped to boost economic efficiency; new housing sheltered families migrating from farms to cities in search of opportunity. The investments turned China into the world’s factory floor and produced eye-popping rates of growth.

Over time, China developed a more advanced economy, but the state and companies nevertheless kept on building. The growth rate stayed high, but now the economy was generating wasteful excess that undermined its health. Logan Wright, a partner at the research firm Rhodium Group, estimates that China has 23 million to 26 million unsold apartments. That’s enough to house the entire population of Italy. Many of these apartments will never be purchased, Wright conjectures, because they were constructed in towns with declining populations. China’s automobile industry, figures Bill Russo, the founder of the consulting firm Automobility in Shanghai, has enough unused factory capacity to make more than 10 million cars (sufficient to supply the entire Japanese car market—twice). Beijing boasts about its extensive network of high-speed railways, already the world’s largest—but the state-owned company that operates it has racked up more than $800 billion in debt and posts substantial losses. The Cato Institute once described China’s rail-building bonanza as a “high-speed debt trap.”

The Chinese “continue to invest beyond what they can actually absorb,” Alicia Garcia-Herrero, a senior fellow and specialist in Asian economies at the think tank Bruegel, told me. “This is why their model went wrong.”

Let's re-trace the contour: Chinese leaders, back in the sub-Ghanian, sub-Pakistani 1980s, realized they were lagging miserably. So they pumped the gas extremely hard, strapping on the piano (so to speak) to hoist a billion people out of poverty. Years later, still sweaty and fervid and very much dug into a mindset (framing!) of "Lift!!!/Build!!!/Invest!!!", they'd overshot by a couple light years. And even now, they're still paddling to Guam.

“Aiming for infinity” (I sort of prefer "paddling to Guam", now, but let's stick with the bit) isn't a brainy matter of miscalculation. Rather, it's the product of pure zeal. You need some zeal, but not unbridled zeal! Don’t aim for infinity! Know where you're going with the damned piano! Don't dunk in the river, much less swim to Guam! Keep your eye fixed on Mrs. Pelmutter's living room!


Note: China's predicament reveals one of many reasons capitalism (where market demand determines investment, rather than a central authority), for all its many ills and excesses, works best.

Also: I was making a larger point, above, but, as both articles make clear, China failed to scale back its Guam-bound fervor not just due to the inertia of frozen perspective, but also for political reasons. Xi probably understood the economics, but autocrats can’t loosen control without loosening control. So that's the other side of the problem.