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U.S. President Joe Biden must have pretty good insight into the mind of his Chinese counterpart, President Xi Jinping, having spent more time with him over the years than any other world leader. "He and others–autocrats–think that democracy can't compete in the 21st century with autocracies, because it takes too long to get consensus," Biden told a joint session of Congress on April 28. If that's what Xi actually believes—arguably a good guess—then China's leader-for-life is at least partly right. Back when they were both vice presidents, Xi Jinping and Joe Biden spent a lot of time together. On a trip to the U.S. in 2012, Xi joined Biden at the International Studies Learning Center in South Gate, California. Photographer: Tim Rue This week in the New EconomyOnly a year ago, the world stood dumbfounded as the richest nation on earth, under the leadership of a Covid-denying president, botched its response to the pandemic, sacrificing hundreds of thousands of lives to a deadly combination of incompetence, hubris and political partisanship. Meanwhile, it was equally obvious that Xi's swift decision to contain the virus with draconian lockdowns, blanket surveillance and Mao-style social controls delivered stunning results. China flattened the curve and—while Republicans swore off face masks and social distancing as Americans perished—engineered a V-shaped recovery. Yet something strange has happened in the months since. Little more than a year after its catastrophic failure began (along with a sudden, hard-stop recession), the U.S. has managed to resurrect itself, and is now the main engine of the global economy. How did this sudden turnabout happen? America's rapidly improving prospects speak to its enduring strengths, starting with an innovative dynamism that produced not one but two revolutionary vaccines in record time. Granted, Pfizer depended on the know-how of Germany's BioNTech, and Moderna tapped highly skilled immigrants, but both only underscore the openness and collaboration at the heart of U.S. entrepreneurial success. U.S. Vice President Kamala Harris (left) and Speaker of the House of Representatives Nancy Pelosi (right) applaud as President Joe Biden addresses a joint session of Congress on April 28. Photographer: Melina Mara/AFP In rallying his country against "autocrats," Biden is seeking to rekindle the energy that drove America's post-war ambitions. With huge programs rivaling those of President Franklin Roosevelt, Biden is targeting the pandemic, the recession it caused and many deep inequities that have long ailed America. He's proposed money for education, science, roads and railways—some $4 trillion on top of the combined $6 trillion or so in emergency relief. That's more than America has spent on all of its overseas conflicts since World War I, and it signals a stunning role reversal. In the aftermath of the 2008 financial crisis, it was China's colossal outlays on infrastructure that rescued the global economy. Now, America is kicking in the cash. True, the Chinese economy is also humming along, but Xi and his advisers are spending more of their time grappling with its enduring vulnerabilities. Mounting debt constrains their options. More fundamentally, the Chinese state is at odds with its leading entrepreneurs. It's becoming clear that the regulatory assault on Jack Ma's digital empire, now spreading across China's tech landscape, is much more than just anti-monopoly: Data is power, and the Party-state doesn't trust private business to control it. For Xi, however, these dilemmas are dwarfed by a challenge over which he has almost no control: demographics. This week brought startling claims that China's population may have started to shrink. That's huge news if true. But even if it's not, the trend is clear: China's hardline birth control measures have disastrously backfired. If the Chinese population hasn't peaked, it's likely to do so soon, acting as a long-term drag on investment and growth. Indeed, the tables may be turning on the conventional wisdom regarding the next few decades. At some point in ten or 20 years, James Liang, an economist at Peking University, told the Economist, America "will retake leadership and China will never catch up." Biden seems sure about the outcome of U.S.-China competition, too. "Autocrats will not win the future," the Democrat went on to tell Congress on Wednesday. "We will." That's by no means a given, of course. A growing danger is that coronavirus mutations may circumvent the current crop of vaccines. Inflation could take off, reversing the U.S. recovery. And it's always possible that factions within the Democratic Party could splinter over Biden's multitrillion-dollar spending plans. Chloe Zhao arrives at the 93rd Annual Academy Awards on April 25 in Los Angeles. Photographer: Pool/Getty Images North America Still, at least the U.S. president sounds confident. That's more than could be said for Chinese officialdom when it reacted to a Beijing-born woman being honored by, of all things, Hollywood. Chloe Zhao made history as the first woman of color to win the Oscar for best director for "Nomadland." Zhao has been mildly critical of China ("there are lies everywhere," she told a 2013 interviewer), so Chinese censors nixed the Oscar ceremonies, including her acceptance speech. In it, Zhao recited a line from a Chinese classic text, saying: "People at birth are inherently good." __________________________________________________________ The Bloomberg Wealth Summit: Join us on May 4 for a virtual event designed to provide private investors, family offices and financial advisers actionable intelligence from economists, money managers and policy professionals. They will shed light on the most vexing questions—and surprising opportunities—facing wealth management in a post-pandemic world. Sponsored by BNY Mellon and Grayscale. Register here. Download the Bloomberg app: It's available for iOS and Android. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more. |
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