China Needs Bigger Government

A Stronger Safety Net at Home Will Make Beijing a Better Actor Abroad


In China, the state controls the commanding heights of the economy—an arrangement that has fed the outside perception that Beijing poses a particular threat to the global economy. The Chinese state limits imports, for example, and rewards foreign firms that shift production to China and voluntarily share their technology with Chinese partners. For nearly ten years, state control of the exchange rate has kept the country’s currency significantly undervalued. Generous credit to state-backed firms fuels overproduction in sector after sector, allowing Chinese companies to undercut their global competitors in important markets (notably 5G technologies). And now new state-backed investment …