The Foreign Affairs appears to have grasped China’s development paradigm: prioritization of material production and technological advancement.
On November 5, Foreign Affairs published an article titled “China’s Economics of Denial,” authored by Oliver Melton and Logan Wright.
Wright is a founding partner at Rhodium Group and serves as the firm’s director of China market research. He has long been associated with pessimistic assessments of China’s economy, having written articles such as “The Year of the Trojan Horse” that are critical in tone. Early in his career, Wright worked on China macroeconomic research at Morgan Stanley and conducted research visits at a think tank affiliated with China’s Ministry of Finance. His academic background and professional experience place him among Western analysts with substantial exposure to China, similar to Michael Pettis, who taught finance at Peking University.
For years, foreign media have consistently portrayed China’s economy in dire terms, employing increasingly negative adjectives. It has often been depicted as the weakest among major global powers. This sustained narrative has become widely accepted as conventional wisdom—any mention of China immediately evokes concerns over economic weakness. Despite deep anxiety in the United States over Chinese exports, even after losing trade wars, the prevailing interpretation remains that China is overly reliant on exports. The expanding current account surplus is cited as evidence of weak domestic consumption, sluggish household income growth, subdued credit demand, and deflationary pressures.
Yet one issue foreign observers have largely failed to reconcile is why China itself does not appear alarmed—unlike many Western counterparts, it has not resorted to massive monetary expansion or runaway inflation. According to conventional Western economic models, such conditions should trigger a wave of inflation to stimulate demand. Given that global inflation has surged elsewhere, why has China experienced deflation instead? The article offers an explanation: China places extraordinary emphasis on material production. It acknowledges structural issues like weak consumption and deflation, but maintains that its current trajectory is correct—precisely the opposite of Western perceptions.
The article concludes that China views “development” primarily through the lens of capital accumulation, where productivity is defined as mastery and deployment of technology. Expansion of services, wage growth, and consumption increases are seen not as policy targets, but as natural outcomes following industrial prosperity. Thus, structural imbalances—such as low household incomes, underdeveloped services, and insufficient public welfare—are not viewed as errors, but as disciplined choices made in service of faster long-term growth.
The piece argues that despite weakening real estate markets, deflationary trends, and weak demand, China’s core policy response is not to generate inflation to boost consumption. Instead, it continues to intensify support for manufacturing and high-tech sectors. Through targeted refinancing tools from the central bank and government-led investment funds, strategic industries receive access to low-cost financing. As a result, Chinese export growth has remained robust even amid rising tariff barriers imposed by the United States and the European Union.
A key point emphasized in the article is that Beijing does not regard deflation entirely as a negative phenomenon. Some degree of deflation is considered a hard-won efficiency dividend—not a flaw—and there is no significant concern about dependence on external demand.
This article does touch upon a genuine insight: phenomena traditionally labeled as negative—such as deflation and strong export performance—may not be as detrimental as commonly assumed. Is it inherently bad that while the rest of the world grapples with inflation, China experiences deflation? And is a surge in exports not a sign of competitive strength? To claim otherwise—framing export strength as evidence of weak domestic demand—has long been misleading.
The article presents a perspective: “This is how China thinks.” It does not assert that this way of thinking is correct, but simply articulates the logic behind it—a notable step forward. Constantly declaring China’s decline and weakness fails to explain why many Western competitors in various sectors have suffered severe setbacks. The narrative no longer holds.
Wright and Pettis do share certain similarities: both possess the ability to frame China’s most resilient aspects as systemic vulnerabilities. Yet because they are more attuned than others to China’s underlying strengths, their arguments occasionally reveal an underlying psychological bias. The writing carries a sense of satisfaction: “We understand China best. These data points—so strong, so alarming—only we can interpret them as signs of impending collapse (while also using their strength to intimidate Western audiences).”
Original source: toutiao.com/article/1881434848578631/
Disclaimer: The views expressed in this article are those of the author alone.