Harvard economist and former IMF chief Ken Rogoff has spent decades inside the rooms where China's leadership is trained. He once believed in their competence—but now he's warning that both China and America are losing their edge, and the combination could be catastrophic.
{## The Voice of Experience
Ken Rogoff is a Harvard professor who served as chief economist at the International Monetary Fund. He's written extensively on currency policy and has spent considerable time in China, including speaking directly to top Communist Party leaders at forums like the China Development Forum.
His access was remarkable. During his IMF tenure, Rogoff met with Chinese premiers and provincial governors. He gave lectures at their party training school—essentially a Harvard-style institution where rising bureaucrats learn competence. The system once valued technical expertise above political loyalty.
But something has changed dramatically under President Xi Jinping, who assumed power in 2013. According to Rogoff, the emphasis shifted from technocratic competence to loyalists. And he sees direct consequences in China's economy.
The Seeds of Crisis
In 2010, China launched a massive stimulus program. Local governments were allowed to sell land and fund construction companies through creative accounting—essentially creating endless ways to finance themselves. This innovation produced growth but planted the seeds of today's problems: massive overbuilding in housing and infrastructure that now sits largely empty.
When Rogoff delivered a talk in 2016 to China's leadership forum, he warned them directly about what he saw. The housing bubble had become unsustainable. Demographics were deteriorating. Power was becoming too centralized.
"They told me Xi would be Ronald Reagan—someone who would liberalize markets," Rogoff recalled. "He didn't do that."
China's official growth rates look impressive on paper—around 10% from 1980 to 2012 in raw numbers. But when adjusted for purchasing power parity, the real figure drops to just over 7%. Under Xi Jinping, even the official numbers have slowed dramatically: perhaps 6-7% versus only 3.5% in recent years.
Ghost Cities and Empty Temples
Rogoff recently visited tier-three Chinese cities—medium-sized towns outside the major metropolises—and describes what he saw as haunting.
"These cities have amazing roads, amazing real estate, but the feel of death," he said. "The train stations are huge. The movie theaters are massive complexes. There's just nobody there."
He visited a Buddhist temple built recently as a tourist site—ginormatic structure with concentric rings that would take ten minutes to drive through. Empty except for a few visitors.
Young people don't want to live in these towns. Jobs aren't there either. Yet 60% of Chinese income comes from tier-three cities, and infrastructure and real estate represent roughly a third of their economy.
The Consumption Problem
The deeper issue isn't just overbuilding—it's what China hasn't done: consume.
Their savings rate is around 45%, while the United States consumes at roughly 70%. European countries sit in the low 60s. China's consumption rate remains very low, meaning ordinary people have little to spend despite rising incomes.
"Give them money and let them consume instead of exporting it," Rogoff argued. "They've been very reluctant to do that."
The solution everyone tells China: encourage consumption, adjust exchange rates to make imports cheaper, provide social security and healthcare so people don't need to save for old age. None of this has happened meaningfully.
Now housing prices are collapsing—the primary investment vehicle for Chinese citizens who couldn't put money elsewhere. People are cutting back. The economy is grinding further.
America's Diminished Advantage
Rogoff isn't just worried about China. He's increasingly concerned about the United States as well.
"We have some very good people, but the average quality at the very top has gone down," he said. "And China's not as competent."
That combination—a less competent America meeting a crisis-laden China—creates dangerous potential for entanglement nobody wants.
Counterpoints
Some economists would argue that China's official GDP figures are still meaningful and that purchasing power parity adjustments may understate growth. Others might contend that Xi Jinping inherited structural problems predating his tenure, making blame disproportionate to his actual policies. Rogoff himself acknowledged that China's economy was always going to slow down as it matured—some decline is natural.
"The general thing would be to try to rebalance saving, investment and consumption."
Critics might also note that the West's own institutional quality has declined in recent years, making America's competence advantage less certain than Rogoff suggests. The U.S. faces its own demographic and fiscal challenges independent of China.
Bottom Line
Rogoff's core insight is compelling: China's crisis isn't a technical problem with a simple fix—it's structural, born from decades of overinvestment and suppressed consumption that cannot be reversed overnight. His biggest concern—that the U.S.-China relationship could devolve into mutual incompetence—isn't just about economics. It's about geopolitical stability in an era when both powers are simultaneously weakening. Watch for signs that China's stimulus attempts fail to move markets, or that America's institutional decay accelerates—both would signal compounding risk for global stability.