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Before he became China’s point man on trade, Liu He was tasked w a massive study of the Great Depression to prepare for the next big one. The hundreds of pages of reports are an early blueprint of China’s likely policy direction this yr. Some takeaways - https://www.washingtonpost.com/world/asia_pacific/china-spent-years-preparing-for-this-economic-crash-fearing-political-pitfalls/2020/05/05/78df2592-843e-11ea-81a3-9690c9881111_story.html">https://www.washingtonpost.com/world/asi...
Liu He wrote that a global economic crisis creates an opportunity for a reshuffling of global powers: “After a big crisis, what is redistributed is not merely wealth within a country, but the relative power of all nations.”
He also said that populist politics have historically hijacked nations’ depression responses, leading to extreme outcomes including war (eg WWII following the Great Depression) “Stay prepared for the worst consequences,” he wrote.
On the possibility of domestic unrest after a crash, he made three *pre-emptive* recommendations in 2013 that have become major parts of Xi’s policy: decrease wealth inequality, strengthen social safety net & root out extremist ideologies.
Liu advised against diplomatic overcommitment & unnecessary military engagements during such a crisis. He attributed the U.S.’s rise as the uncontested post-WWII economic power to its decades of isolationism, as other powers exhausted themselves fighting each other
This was right after the 2008 financial crisis. He wrote that China was too accommodative to Western countries in that crisis, at the expense of distortions in its own economy. Suggested leaders think carefully about China’s interests next time
Harvard’s Kennedy School published an English translation excerpt in 2014, which is a good summary of the full report: https://www.hks.harvard.edu/centers/mrcbg/publications/awp/awp33">https://www.hks.harvard.edu/centers/m...
The full report was published in Chinese in 2013: “Comparative study of two major global crises,” edited by Liu He. Co-written by officials at China’s central bank and banking regulator, as well as Beijing scholars https://m.douban.com/book/subject/21964791/">https://m.douban.com/book/subj...
A chart from the version published in 2014, illustrating the global power structure shift following a major economic crisis.
