“In looking at the broad thrust of what has really driven China over the last 40 years, especially over the last 20 years, [China’s recent regulatory] actions go right at the heart of that dynamism,” Roach said.

In recent months, Xi’s government has launched a wide-ranging campaign to rein in the power of its corporate titans. The campaign has included new antitrust rules for tech giants like e-commerce company Alibaba, social media firm Tencent, and ride-hailing firm Didi. Xi has also promoted a new “common prosperity” campaign aimed at redistributing China’s wealth more evenly across its economy, urging China’s top companies to cut executive salaries and prompting firms like Alibaba to donate billions to the cause.

But Roach says that Beijing’s heavy-handed approach to regulating tech giants may undermine the relatively free-wheeling environment in which firms like Alibaba and Tencent powered China’s economic rise.

“[Xi] says, ‘We’re still supporting the private sector, we just want to do it our way,’” says Roach. “[But] I think that’s a big risk going forward.”

Roach is less concerned about the risk that embattled property developer Evergrande poses to China’s economy, even though its crisis seems to be dragging down China’s economic growth this year.

On Monday, China said its GDP grew 4.9% in the third quarter compared to last year, below analyst expectations of 5.2% growth and China’s 7.9% growth in the second quarter. Analysts say the crisis at Evergrande, a firm on the brink of default after failing to meet debt obligations, dampened demand in the real estate sector, and Bloomberg reports that home sales in China were down 17% in September from last year.

Still, Roach said that China’s government can prevent the Evergrande mess from spreading to China or the global economy in the long term.

“I think the government has ample liquidity to ring-fence and backstop this failure,” Roach said. “[Urbanization] is going to continue to fuel the demand for shelter and limit the impacts of a property shakeout on the overall real economy.”

China’s economy is also feeling the effects of supply-chain disruptions. China’s growth this year has slowed, in part, due to manufacturers struggling to ship goods abroad amid delays and overcrowded ports.

But Roach warned that the global supply chain may not bounce back in China or globally as quickly as many assume. He explained that supply-chain issues may continue for years and carry the real risk of leading to prolonged “stagflation”—high inflation combined with low economic growth—in places like the U.S. in coming years.

“We’re in the midst of a full-blown global supply shock that is strikingly reminiscent of what we lived through in the early 1970s,” says Roach. “Bad dreams, every once in a while, they do come true.”

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