New Delhi, May 6 China has pushed mercantilism to the extreme when it comes to producing steel, and the day is not far when this approach will destroy Chinese civilisation, IT software company Zoho’s CEO Sridhar Vembu said on Monday.
Mercantilism is a nationalist economic policy designed to maximise exports and minimise imports for an economy.
Replying to Michael Pettis, American professor of finance at Peking University in Beijing and a nonresident senior fellow at the Carnegie Endowment for International Peace, Vembu said that anyone who “truly cares for the longevity of Chinese civilisation can see how mercantilism would destroy it”.
China produces roughly 55 per cent of all the steel in the world.
“This is mercantilism pushed to the extreme. This obsession with exports is costing the Chinese people themselves dearly, by overworking their people, not to mention pushing other countries into debt,” Vembu argued.
What China accumulates in return is the debt of other nations, and that is “fool's gold” because the debt can never be repaid.
“Repaying means China has to import much more than it exports for a period, which the Chinese government won't permit,” the Zoho CEO said.
Pettis had posted on X, quoting a South China Morning Post article titled “China’s steel industry risks ‘falling off a cliff’ as overcapacity concerns point to the end of an era,” that China’s steel industry has become a stand-in for the overall economy, with growing supply facing declining domestic demand.
Vembu said that Japan and South Korea have “run this movie”.
“It ends in demographic suicide because young people, overworked and over-concentrated into giant cities, facing high housing and educational costs, have no time or energy for children. Civilisational energy fades,” he warned.
This is why India should never run “massive and prolonged surpluses like East Asia has done”.
“Balanced trade would be good for our own people, our civilisation and would be our gift to the world,” said Vembu.
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