The Power of Debate

May 30, 2024

I have relished the debate for as long as I can remember. As I head back to Asia yet again, there will be no lack of opportunity to engage in intellectual sparring. I return with some trepidation. First stop, Beijing, where I was silenced at the China Development Forum in late March. Then, on to Hong Kong for the first time since my now infamous opinion piece in the Financial Times made waves bemoaning the possibility that “Hong Kong is Over.” Time for a few deep breaths.

What do I hope to accomplish by returning to the scene of the crime(s)? Or as I put it on the way back from my last trip to China, “What’s the Point?” My answer back then, was a promise to keep showing up, and in doing so, keep pushing for vigorous and open debate. This return trip feels like a journey in personal accountability.

In Beijing, I will be delivering an uncomfortable message to Chinese audiences that have been counseled by their political leaders to ignore problems and focus on “the good stories of China.” I will focus, instead, on a trifecta of concerns that you, dear readers, will hardly find surprising: the growing possibility of the Japanization of China;  the diminished role of China as an engine of global growth; and the seemingly ever-mounting perils of the Sino-American conflict. That’s hardly the uplifting message that my Chinese friends have long been accustomed to hearing from me.

In Hong Kong, my overarching purpose is to follow my own advice and simply show up. In my years of living there and serving as Morgan Stanley’s senior executive in Asia, I was warmly welcomed as an insider. Now by having the audacity to question the future of a city that has long been a very special part of my life, I find myself in the uncomfortable position as an outsider. I am not going back to Hong Kong to apologize but to explain how and why I have come to a very tough prognosis for this great city. Spoiler alert: It has a lot to do with the message I am about to bring to Beijing.

That answers the second question I pose above—why return? But it ducks the first, and much tougher, question: What do I hope to accomplish by making a difficult case to largely unreceptive audiences?  Certainly not much in the form of any immediate gratification through direct action. While I don’t make it a practice of revealing the names of individuals or even groups I meet with, I will disclose that I will not be meeting with any current senior leaders, either in China or Hong Kong—no one, who after listening to me might have an a-hah moment and pull the trigger, take an action, alter the path.

At the same time, I must stress that I am not flying halfway around the world to see the sights. My schedule is packed with six days of meetings, lectures, and presentations that borrow a jet-lagged page right out of the most demanding days of my Wall Street career. I will see a broad cross-section of senior corporate executives, leading investors, former policymakers, the think-tank crowd, illustrious members of the fourth estate, academics, and even a few of my students. For lack of a better term, this is a group of “influencers”—those who drive and shape the great debate in the marketplace of ideas.

Collectively, groups like this can make a meaningful difference to markets, policy, and real economic outcomes. They have the potential to challenge the status quo, dislodge ossified thinking, and in doing so, ultimately bring about change. That was the part of my Wall Street career that I loved the most—both as a chief economist and as a senior executive: having an impact on the influencers, making smart people think, and rethink, deeply entrenched views. And to be perfectly honest, making me do the same with my own, often misdirected, views was equally important. The debate does all that, and more.

Even in China. A one-party authoritarian system doesn’t exactly seem as if it is open to debate. Sometimes, that is unfortunately the case—my recent tough experience at the China Development Forum is an obvious case in point. But other times not. My favorite example of the power of debate in Chinese policy circles centers on an interview with an anonymous “authoritative person” that was published in May 2016 on the front page of People’s Daily, the official organ of the Chinese Communist Party.

Shockingly, and that is a fair description of the reaction at the time, this interview raised deep questions about the fate of the Chinese economy—specifically whether China was headed into the trap of a Japan-like “lost decade.” The interviewee, who has never been officially identified, but long thought to be a senior Chinese policymaker close to Xi Jinping, warned of the excesses of debt-intensive economic growth, asset bubbles, financial crises, and eventually an “L-shaped” stagnation. That interview had a huge impact: it sparked a major debate in Beijing policy circles that led to the roll-out of some important new policy initiatives aimed at avoiding the Japanese disease—namely, a deleveraging campaign as well as the supply-side structural reforms that were seen as an antidote to weak productivity and a profusion of Japan-like corporate zombies.

Fast forward to today, with an increasingly debt-intensive Chinese economy in the grips of a wrenching property crisis, and the prescience of the authoritative person borders on remarkable. The debate that interview sparked eight years ago is well worth having again. I will be underscoring that very point over the next few days in Beijing. At the same time, there is another growing debate in Chinese policy circles—this one over the imperatives of consumer-led growth. Many, including yours truly, have been pounding the table for years on China’s consumer-led rebalancing imperatives. Will this finally sink in to the powers that be?

The debate matters. The ideas that drive the debate matter even more. That’s what brings me back to Asia at an enormously challenging time. China, and by inference, Hong Kong,  are in desperate need of new answers, new ideas. So, too, is the rest of a chaotic, conflict prone, increasingly Sinophobic world. None of us has the perfect, or even the imperfect, answer. But without vigorous, open, and honest debate, we don’t have a chance of finding a way out.

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