Illustration: John Shakespeare
A meal of four dishes and one soup sounds pretty generous to a Westerner, but in China it's the new catchcry for restraint.
In an era of fast-flowing prosperity for China's ruling class, banquets of 20 or more courses are common. Lavish liquor-lubricated feasts have also become a target of popular resentment in a country with a rising sense of outrage at official misconduct and corruption.
China's new leader, Xi Jinping, moved quickly to restrain his officials and set a new model of conduct. On a provincial trip in December, Xi sat down to a meal of four dishes and one soup. The state-run news agency, Xinhua, not only published the menu but also reported the president specifically instructed no drinks were to be served.
''Four dishes and one soup'' was immediately embraced, setting off a downturn in restaurants favoured by the expense-account set. So it's new, but it also has powerful historical resonance. The term was established when the first emperor of the Ming dynasty, Zhu Yuanzhang, taught his officials the same lesson of restraint.
Advertisement
Even so, the new era of moderation shocked the world when it turned up in China's economic growth figures two weeks ago.
After three decades of extraordinary economic growth, and after a decade at the breakneck pace of 9 per cent a year, outgoing premier Wen Jiabao declared such growth was ''unbalanced, unco-ordinated and unstainable''. The new growth target he announced for last year is 7.5 per cent a year. Yet when the statistician announced two weeks ago that China grew at an annualised rate of 7.7 per cent in the first quarter of this year, share markets worldwide slumped.
The Australian dollar, seen in global markets as something of a proxy for Chinese growth, fell by US1.13¢ against the US dollar. So the economy was doing what China wanted, doing what they had announced, yet investors were shocked and disappointed.
Why? The world investment community had talked itself into expecting that China's new leadership would start a fresh investment binge. But it did not.
''As a result, fears of a hard landing once again regained momentum,'' says Yiping Huang, an economist at Peking University and the ANU. One prominent American commentator on China's economy, Patrick Chovanec, felt a guilty surge of vindication as the jolt hit share prices from Mumbai to Madrid.
In the past few years as a professor at Tsinghua University, Chovanec had won considerable attention with his predictions of an unhappy end to China's long boom.
''It's almost not wanting to be vindicated,'' Chovanec said during a visit to Sydney. Now a strategist for Silvercrest Asset Management in New York, he says: ''I've devoted a considerable part of my life to China and I have family there. I don't want things to go wrong for China.''
Yet he sees that as the most likely outcome, and already under way. The problem, he says, got serious after China's reaction to the global financial crisis in 2008.
''China has risen over the last 30 years on the basis of the East Asian export model,'' the one pioneered by Japan after World War II.
By concentrating a big effort on investment to sell manufactured goods to the world, all these countries have brought home big gulps of foreign cash. This cash has allowed more investment, and more exports, and more cash, a virtuous circle that's allowed turbocharged growth.
The problem? ''This export model works fine if you're a small economy, but when you become the second biggest in the world - as Japan did in the 1970s and '80s - it's very hard for the world to bear.''
The global financial crisis was a threshold. The US and Europe, recession-struck, could no longer buy vast new volumes from China's factories.
''China's response,'' says Chovanec, was not to move to a new model for growth, but to ''double down'' on the old one, with a mighty new wave of investment. China has built itself a good deal of world-class infrastructure in a hurry. ''So China's been growing for these last several years by adding to its capacity, but for the growth to be real, that capacity has to be used.
''There's a lot of empty ports, empty apartment buildings, empty offices, empty airports.''
Chovanec points out that of China's impressive growth of 9.2 per cent in 2011, more than half - 5 percentage points - came from investment. ''Without all that investment, China would have had GDP growth of only 4 per cent,'' which would feel like a deep recession to the Chinese. ''To keep growth going, China not only has to keep investing at ever-higher levels, but if that investment isn't used and generating a return, it creates a financing issue'' as the loans used to build them turn into big losses for the banking system. He frets that a painful crunch is coming, a crunch that could deliver a new global recession: ''China's authorities aren't magicians.''
He sees China as Japan was in the 1980s, when it hit an economic wall and entered a two-decade stagnation. But other experts see it more closely akin to Japan in the late 1960s, when it was upgrading its economy into a new, slower but more manageable growth phase. China's magic carpet ride isn't over, it's just moving to a new carpet for a new phase, in this view.
Yiping Huang points out that the adjustment to a new model is under way - China is less dependent on exports and investment and shifting to a consumer-led economy. Consumption accounted for one-third of the economy in 2007; last year it was a half.
This doesn't preclude some bumps in the transition. But the new model should mean less voracious demand for commodities; the Australian dollar should eventually drift lower, giving respite to all the non-mining parts of the economy, the ones that employ 98 per cent of the workforce.
Four dishes and a soup, ultimately, is more sustainable and more palatable for China and the world.
Peter Hartcher is the international editor.