Miami–In the late 1950s, Mao Tse Tung, self-styled Great Helmsman of the Chinese Revolution, declared an economic policy based on two phrases: “take steel as the key link” and “take grain as the key link.”
These were top-down pronouncements designed to spur Chinese to, above all, produce steel and cultivate grain as means of accelerating development. The results were courtyard foundries to make steel, chopped-down orchards to make way for wheat, economic chaos and famine. This was known as the Great Leap Forward, though in reality it was a tragic jump backwards.
Long since, China moved on to a market economy, but old habits die hard. Slumping growth and a crash on Pudong South Road, China’s Wall Street and home of the Shanghai Stock Exchange, has prompted a panicky President Xi Jinping to order top-down fixes: at one point, ordering some companies to stop selling stock, telling state-owned companies to buy stock and giving them money to do it, abruptly devaluing the yuan to stimulate exports and coming soon, funneling more money to banks to make loans to private business. Xi’s motto seems to be, “Take bull market as the key link.”
That none of these measures has yet to produce results sapped confidence in China’s command of events and fueled suspicions that China’s economy is worse off than anyone imagined. World stock markets reacted with vast sell-offs in anticipation of a global recession.
Deep problems are eating the wolves of Pudong South Road and maybe everyone else. A Great Leap into the abyss, maybe.
WSJ tells what’s next.
Foreign Policy on who’s been hurt worldwide.