Noah Smith
· Noahpinion
· August 16, 2026 at 07:26
· ⏱ 4 min read
| Read on Substack ↗
Summary
Zhu Rongji's export-led, privatization-driven growth model has reached its limits, and Xi Jinping's state-led industrial policy is an unproven successor. China's official growth has slowed to roughly 5% (independent estimates 2-3%), and the economy is now k-shaped — strong advanced manufacturing alongside a property-led domestic slump. For markets, the key read-through is structural divergence between China's high-tech industrial beneficiaries and the broader China economy.
•Zhu Rongji, who died at age 97, oversaw China's reform and opening-up from 1991 to 2003, including WTO accession, accelerated SOE privatization, bank bailouts, and a major tax reform that shifted revenue to the central government.
•East Asia's population living on less than $3 per day fell from 1.22 billion people — over half the world's total — to one-sixth of that level by the time Xi Jinping took power.
•China's official growth rate over the last 15 years is about 5%, less than half of the Zhu-era pace, and independent estimates range as low as 2-3%.
•When Zhu left office in 2003, China's income level was roughly comparable to Tanzania or Zambia; today it is closer to Argentina or the Dominican Republic.
•TFP estimates for the 2010s are contested: the Penn World Tables now shows annualized TFP growth above 2%, while the Conference Board and Brandt et al. estimate around 1%; all sources agree TFP growth has slowed and Xi's industrial policy has not re-accelerated it.
•Xi has launched a 'new national system' of R&D and the largest industrial-subsidy system in world history, but China's economy is now 'two-speed': high-tech manufacturing is increasingly competitive while the broader economy remains mired in the aftermath of the real estate bust.