1 Introduction Any answer to this question must be framed against the background of China’s relative economic success when compared to the West. China grew at an economic growth rate of about 10% a year in PPP values between about 1975 and 2024 when China matched and outgrew the USA. From 2024 to 2024 Chinese economic growth fell to an average of about 6.8% [the CIA world Factbook records 6.9% (in 2024. 6.7% (in 2024. and 6.9% (in 2015)] so about a 3.2% drop when compared to China’s previous rate of growth.1.1 My email to ChinaOn 21 May 2024. I emailed three individuals - one in the Council of the Institute of New Structural Economics and a second in the School of Economics with a third in the School of International Relations, all in Peking University - with the following suggestion“The purpose of this email is to suggest that the Chinese Government should consider employing me and ideally my friend, colleague, and mentor Professor Richard Werner to help accelerate China's economic growth rate and assist the policy of producing high income growth for workers based upon a continuing high level of productive investment funded by Shimomuran no-cost investment credit creation at the People's Bank of China and its provincial subsidiaries, and by the more complete creation of a system of Sparkassen-type local public banks to foster the establishment and growth of often high-tech Chinese SMEs. And to help achieve much else.”I estimated in that email that I and Werner had information which probably could“ accelerate the growth rate of China from its current level of about 7% pa real growth by an additional 5% pa (plus or minus 2.5%). That is, the growth rate of China could become at least about 12% pa (plus or minus 2.5%), significantly above its otherwise level.”I was disappointed but not surprised at the lack of any Chinese response. After all, I’m just a Scot who has co-authored two books and written a further five on my own, about Financing Industrial Investment and about Reversing Economic Decline and about The Role of Banks in Economic Development and about Lucky Bastards of the 20th Century -The Story of the Economic Bomb and about Shimomuran Economics and the Rise Of The Tokyo Consensus Ecnomies, to name but five. I’ve also written since 6th November 1971 over 400 articles on my favourite subject about how to accelerate economic development, and I predict I’ll probably complete my studies and research after 50 years, in 2021.1.2 A Proposal to Amend the Question I would prefer to nuance this question into “What have been the issues China did not get more correct in Chinese economic policy during the last decade?” because that changed question makes it clear that Chinese economic policy failures are more a matter of degree than about the adoption of the wrong policies. Which of these incomplete issues is the greatest failure, I leave for my readers to decide, but all are major policy inadequacies, and there is no one answer to this question. I think there are eight major issues where Chinese economic policy has been deficient during the last decade as listed at sections 2.1 to 2.8 below.1.3 This Issue Is One I’ve Considered Many Times Before so this Answer is studded with references to these previous articles. My major article probably isThe Most Successful Economic Policy Of All Time - The German Historical Economics Development of Shimomuran-Wernerian Macroeconomics by George Tait Edwards on The Most Successful Economic Policy of all time2 The Eight Major Issues which China did not get more correct in Chinese economic policy during the last decade wereZonal imbalanceB&RI/OBOR projects without associated carbon captureNo provision in B&RI/OBOR for green electricity generationNo full examination and adoption of the Prof Sinclair’s epigenetic research which can probably nullify the dependency trapNo adoption of ALL the growth-increasing and inflation-limiting and financially-stabilising procedures of Shimomuran-Wernerian macroeconomicsNo apparent use of the Granger Causation Analysis in its modern Henry II format of the indicative “Granger Causative” relationship between PBoC credit creation and economic growth at national and provincial levelsNo leadership on funding and reversing global warmingNo policy that China can Become the Educator in Growth Economics For The Rest of the WorldAll of these policy deficiencies are major issues and if not better handled will reverberate historically limiting China’s future growth and lessening its future place in the world.2.1 China has not adequately dealt with zonal economic imbalanceSince the start of the Chinese economic miracle, the Eastern Coastal provinces of China have had a higher growth rate than the Central provinces which in turn have had a higher growth rate than the Western provinces. This map of the 2024 income per capita in each Chinese province illustrates the position.See Mapping China's Income Inequality by Matt Schiavenza, The Atlantic, Sept 13 2013.This has not been a problem of the last decade but a persistent issue which the Chinese Government has not adequately addressed for decades. The major financial convoy belts moving PBoC created credit down to local SMEs do not appear to be as effective in the western and central provinces of China to the extent they are in the coastal provinces.The wealth and welfare of the people of each Chinese province is dependent upon the level of financial support provided to SMEs by local banks. As this answer reportsGeorge Tait Edwards's answer to What is active participation of people and why is it important in the development of a country?“See Slide 2 (copied below) of Lijuan Zang’s excellent slide presentation at Contributions Of SMEs To China’S Economic Development which states that”Because of the close relationship between SME support and Provincial incomes, the above map of income per head in each province is also an indicator of the level of support for provincial SMEs.As Hermann Simon has argued (see above answer) Germany with 81m people has for many years out-exported China which has 1.37bn people mainly because Germany has a nation-wide Sparkassen Banking Sytem of 431 Savings Banks with 15,600 branches and these banks support SME foundation and development. I calculate that the degree of development of China’s local SME-supporting system under China’s Small Business Law is about 64% effective. I can get answers in the range between 67% plus or minus 3% depending on the dataset I calculate it from.The Chinese Government appears to realise that the funding arrangements for the western and central provinces are inadequate. It seems that SME output would rise by a minimum of about an additional 50% if similar and better Public Banking arrangements for SME funding were made available across all China.This is a very significant issue. The future of China depends upon the level of inventive and innovative success of its people and a calculation of growth potential based on hidden champions produces near infinite results. SeeGeorge Tait Edwards's answer to What specific economic policies have been the most effective in promoting growth in a country?which states“The ingenuity of all people resides in their SMEs where invention (and if there are supporting financial systems, innovation) occurs and these initially small inventions become the foundation of the major industries of the future. This only occurs really well in Germany, where Sparkassen-Wernerian development leads (as Hermann Simon has shown) to a great export performance and the German domination of the EU.The foundation of world-leading manufacturing lies in the Shimomuran creation of vast flows of investment credit which produces vast factories with all their subsidiary SME parts-producers. Japan’s car industry, South Korea’s production of c37% of the world’s flat-screen TVs, and China’s high exports of motor vehicles and steel are but minor illustrations of that phenomenon.”and seeGeorge Tait Edwards's answer to How could China grow more rapidly with regards to its economy?where the issue of the inadequacy of Chinese local public bank support for SMEs is more fully considered. Section 2.3.2 suggests“Potential Chinese Innovation Levels Germany is producing 1,600 SME champions and has 80 million people - an SME innovation level of 20 champions per million people. If China had a similar rate of development of SME champions, it would have (1374 times 20) or 27,480 SME world champions. That’s about 8.5 times the current estimate of numbers of the SME champions of the world. The effects of that would be incredible. Imagine over 75 times the innovative effect of the USA. The numbers seem fantastic, but then so do many such in China.” And note Section 2.3.5 which states that:“Chinese SMEs are the Major Driver in Chinese Economic Development and the Key to the Innovative Future of China. The 2024 Chinese SME Promotion Law has helped that to happen. These 45 million SME companies are producing 58.5% of China’s GDP output and contributing 50% of tax revenues, about 70% of exports and 75% of employment growth in China. Amazingly, more SMEs could do much more.Germany has 3.75 million SMES and China has 45 million such organisations. Given that the Chinese population is about 17 times larger than Germany’s, about 64 million Chinese SMEs would be expected to exist. An extra 19 million Chinese SMEs would probably come into existence as a result of the better regional funding of invention and innovation. These new organisations would add some 42% more to the current growth, tax revenues and exports of China.China’s GDP would rise in the short term of a few years by about 24%, its tax revenues by 21%, and its exports by about 29%, due to these many more SMEs.The return on annual expenditure is very high - about a 24% increase in GDP (about $21.29tr. times .24, or $5.11tn), divided by (0.31 percent of GDP or $6.6bn) - or a benefit/cost ratio of about 77.”All of these calculations are approximate but at the right level of “Fermi calculations.” Obviously this is a major issue.2.2 The B&RI/OBOR project should be retrofitted with cement plants which convert about 90% of the very hot CO2 (produced by coal-fired, gas-fired and oil-fired power generation) into high quality cementChina is by far the largest producer of cement in the world. As List of countries by cement production - Wikipedia recordsList of Countries by Cement Production - Hydraulic Cement World Leading Producers - Million Metric Tonsin 2024 China produced 2,500 million tons of cement out of a world total of 4,180 million tons - that’s about 60% of world production in China. The production of cement in China from July 2024 to July 2024 was about 2,477 tons.See China: cement production 2024 | StatisticThe largest project in the world - the B&RI/OBOR project -has a very large cement pour in virtually all of its capital projects. It is possible to minimise the global warming effect of that cement production by retro-fitting recent technology which converts 90% of the hot CO2 into cement. See the Scientific American report at Cement from CO 2 : A Concrete Cure for Global Warming?The cement pour from the B&RI/OBOR projects, as currently designed, would significantly increase global warming as a by-product of the increased CO2 coming from the use of gas and coal and oil fuelled energy plants to make cement. Coal oil and gas energy generation can be combined with cement production to reduce CO2 emissions by 90%. Of course it may need the transport of, or some piped seawater, to inland power generators but that’s a small price to pay for the cement generation and the CO2 reduction. SeeEnvironmental impact of concrete - Wikipedia estimates that“The CO2 emission from the concrete production is directly proportional to the cement content used in the concrete mix; 900 kg of CO2 are emitted for the fabrication of every ton of cement, accounting for 88% of the emissions associated with the average concrete mix.[4][5] Cement manufacture contributes greenhouse gases both directly through the production of carbon dioxide when calcium carbonate is thermally decomposed, producing lime and carbon dioxide, [6] and also through the use of energy, particularly from the combustion of fossil fuels.”All of the aspects of cement production can be adjusted to lessen the release of CO2 at all points in the production process. That could be and should be done. I am reminded of a bit of A E Houseman doggeral (see The Shades of Night... A.E. Houseman) which in my amended form says“The wealth of man is growing fastThe ice is melting fasterWe must reduce the greenhouse gasesTo prevent disaster.”And China should fit that cement-creating technology next to its many coal and gas fired power plants in locations where that cement can be used.2.3 The B&RI/OBOR Project should be driven by Sustainable Electricity GenerationThe B&RI/OBOR project is at present the largest in the world, and its only competitor in terms of scale could be its successor projects. See paras 3,2 ofGeorge Tait Edwards's answer to Are Belt and Road Initiative loans beneficent or predatory? which suggests the B&RI/OBOR could grow to a much larger $14tr project in a B&RI/MBMR (Many Belts, Many Roads) improving the communications in Africa, South America, and in the Pacific and South Atlantic Ocean.The estimated increases in Chinese GDP from that total project becomes about $11tr over a decade or so and the extra projects costs involving hot CO2 conversion to cement and green power generation might be about another $3tr.2.4 China should rapidly assess the merits of the Epigenetic Research of Professor David Andrew Sinclair and Should Become The First Nation to Sidestep the Rising Dependency TrapSeeGeorge Tait Edwards's answer to What are barriers to China's economic growth?The ground-breaking research of Prof David Andrew Sinclair may avoid metabolic syndrome diseases entirely and enable China to become the first country to break free from the “dependency trap” and to grow even faster based upon a larger, longer-living, healthier population.In previous situations, the “dependents” - defined as the numbers of the non-working young and the old - become a larger fraction of the “workers”, or those who are economically productive. The improvement in the healthspan plus the lengthening of the lifespan creates a lasting increase in the working population and the probability of a much larger economy.Again, not a minor issue.2.5 China Should Consider Adopting ALL of the Shimomuran-Wernerian Economic PrinciplesRelevant articles:George Tait Edwards's answer to What makes a GDP grow high or stay high?George Tait Edwards's answer to Why does George Tait Edwards see Shimomuran-Wernerian macroeconomics as the key understanding in the future of mankind?George Tait Edwards's answer to Why didn't China become a world superpower when it first invented gunpowder, printing, paper, the compass, and great ocean sailing ships, before the West did? and perhaps most significantly my 18 February 2024 ArticleHow China Surpasses The EU and the USA, or The Seven Pre-Requisites for High-Growth Shimomuran…Please also read How could China grow more rapidly with regards to its economy?where the first paragraph begins“Introduce The Missing Policies to Increase Chinese Economic DevelopmentAs that article records, on my estimate, China is only scoring about 4.2 out of seven on the adoption of the key measures which provide a Shimomuran advantage in producing higher economic growth. That’s better than any other country in the world is doing but as an obsessive teacher of realistic economics I would mark China’s report card “Could do much better.” I not only think it could, I think it will.2.6 No apparent use of the Granger Causation Analysis in its modern Henry II format of the indicative “Granger Causative” relationship between PBoC credit creation at national and provincial levelsIn 1969 Clive Granger (1934–2009) put forward the amended correlation calculations of Granger Causation Analysis. That was immense improvement in econometric calculations and Clive Granger and Robert Engle won the Nobel Prize in 2024 for that enormous advance in econometric calculations and Granger Causative understanding of the statistically reliable relationships between leading indicators and following results. See Clive Granger - Wikipedia and Granger causality - Wikipedia and Engle, Granger win Nobel Prize for Economics. And see Henry II Forecasting.If the Granger Causation Analysis in their most modern format of Henry II calculations were performed for China, then the Chinese Government would have the best available future estimates of the most probable Chinese rates of economic growth based upon the leading indicator of PBoC credit creation. Professor Richard Werner has already calculated such a formula for Japan.Such a calculation automatically incorporates the declining trend in the efficiency of capital otherwise expressed in the increasing capital-output ratio.Such a calculation would increase the real options available to the Chinese Government when considering the future leading indicator of PBoC credit creation levels and the consequential result of Chinese economic growth.This may seem a technical point but it is not. The Chinese Government should know in advance where the economy is heading and should have the advantage of the best available technology to predict that.In my view Henry II calculations could probably be done for each of the Chinese provinces, if the data exists (which I think that is likely). That too would assist Chinese economic policy decisions.It is a mistake in any nation not to use the best available technology to predict the future and to inform policy makers about the likely results of different options.2.7 China Should Take The Lead In Reversing Global WarmingPresident Trump has withdrawn from the Paris Agreement and China is the natural leader of the giant project of reversing Global Warming. China has both the production capacity and the economic capability to lead the nations of the world in reversing global warming through sustainable energy production through the use of wind power turbines, solar panels, and giant dams, all of which China has demonstrated it is pre-eminent in producing. See the undated Guardian report (previous to 2013,when Li Keqiang became President of China) Le aboutChina's green growth potential 'could create 9.5m new jobs'“The report was released this week by the China Council of International Co-operation on Environment and Development, which is headed by Li Keqiang ․ widely tipped to become the next prime minister ․ and includes 200 domestic and overseas experts and leading figures in the United Nations and other world bodies”China is leading in these technologies but these are not as widely implemented as they should be. SeeChina cementing global dominance of renewable energy and technologyWhich remarks“China is cementing its global dominance of renewable energy and supporting technologies, aggressively investing in them both at home and around the globe, leaving countries including the US, UK and Australia at risk of missing the growing market.A report by the Institute for Energy Economics and Financial Analysis (Ieefa) found China’s dominance in renewables is rapidly spreading overseas, with the country accelerating its foreign investment in renewable energy and supporting technologies.Analysing Chinese foreign investments over US$1bn, there are 13 such in 2024. worth a combined $32bn. That represented a 60% jump over similar investments in 2015.China to generate a quarter of electricity from wind power by 2030China was already widely recognised as the largest investor in domestic renewable energy, investing $102bn in 2024. according to Bloomberg New Energy Finance ․ more than twice that invested domestically by the US and about five times that of the UK.The big foreign investments in 2024 included two in Australia, two in Germany and two in Brazil, as well as deals in Chile, Indonesia, Egypt, Pakistan and Vietnam.In Australia, China Light & Power struck a $1.1bn deal, buying power from wind and solar farmsIn Chile, Tianqi Lithium spent $2.5bn acquiring a 25% stake of a lithium miner and processor. (Lithium is essential for lithium batteries used in electric vehicles and home battery storage.)In Germany, Beijing Enterprises Holdings Ltd spend $1.6bn on a Waste to Energy development.The report noted the global expansion cements China’s total domination of renewable energy growth globally. China now owned:Five of the world’s six largest solar-module manufacturing firmsThe largest wind-turbine manufacturerThe world’s largest lithium ion manufacturerThe world’s largest electricity utility”That’s tremendous progress but not yet adequate to reverse global warming, but it could do once it is scaled up.2.6 China Should Become the Economics Educator For The Rest Of The WorldChinese leaders should stop saying that the economic model which produces the Chinese economic miracle is not applicable elswhere. It is.It should be.3 Discussion3.1 Legislation to Give Chinese Women an Equal Place in Chinese SocietyOn May 27 2024 a photograph taken “during trade talks between the US and China has gone viral on Chinese social media. Interpreted by many as symbol of the changing of the global guard, the picture reveals US negotiators looking far older. than their Chinese counterparts.” SeeA contrast between Chinese and US trade negotiators has gone viral in ChinaHere’s the photo:China, like the USA, has far too few women at this top table or even around this top table and I think the ones that are there, are probably interpreters or observers.In my opinion legislation should be introduced into China to give Chinese women an equal chance to gain a more equal place in business, in society and in politics. And if possible within the family, although the Chinese tradition of Ancestor Worship will be difficult to modify. Women are perfectly capable of attending the family graves and are the re-creators of mankind. They are that half of the human race that places the love of their children above themselves. Leonardo da Vinci said ”Everything I am, I owe to my mother” and I think that may be true of nearly all transcendentals.See Gender equality? What research reveals andhttps://www.closethegap.org.uk/c...And see (PDF) The impact of Gender inequality on Economic Growth3.2 Other IssuesAlso seeGeorge Tait Edwards's answer to What did China get right in its economic and social development which the US got wrong? andGeorge Tait Edwards's answer to What is the future of China? Is the economic future of China a bubble, or do you think it’s solid?There could be hundreds of such articles appended, but I must stop somewhere. And of course I think the Chinese Government may be mistaken not to pay the appropriate attention to my research and to that of Professor Richard Werner.4 AnswerI cannot identify a single biggest failure in Chinese economic policy during the last ten years, but there seem to me to be about eight issues where the economic policy of China could have been better implemented. as listed above.
