I saw this comment on Reddit by an expat living in China that had me a little worried. I know a few points are BS, such as the comment about the size of Russia’s economy, but how about the overall trajectory of China’s economy?
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Anyone who tells you that the economic situation in China is “doing fine, especially when compared to country X” is either a troll, a paid troll, a bot, or has been drinking the CPC Kool-Aid.
It’s difficult to summarize it in one cohesive post, but I’ll give it a try.
In essence, China’s growth model has been unsustainable for at least 20 years, and evidence suggests they plateaued 15 years ago. Any development after that has been at the cost of increasingly expensive malinvestments than the actual ROI.
Part of the issue has been the obsession with maintaining a high GDP, often for no reason other than allowing the responsible officials a fast track for promotions. The use of Local Government Financing Vehicles to shore up cash for civil services worked only so long as property developers were willing to pay for land-use rights, which was only possible so long as there was cheap capital available to borrow, and people willing to pay for apartments that might be finished six years down the road.
This made up 30% of China’s total GDP. And all of it is gone now.
The housing sector itself is in a permanent state of decline that simply cannot recover. Ever. There are many reasons for this (as mentioned in the paragraph above), but also because of China’s current and future irreversible population decline. There are simply not enough people to actually move into these overpriced bricks of concrete, and there never will be.
Covid didn’t cause the collapse to happen, but it accelerated the inevitable.
It’s quite telling just how bad the situation is when realtors aren’t even allowed to lower the prices of apartments they can’t sell, because if they do, people will begin to realize that the value of the apartment they poured their life savings into is much lower in reality.
Anyway, I digress.
The property sector’s ails are not the failure of Xi Jinping himself. The issues stopped being manageable at least 15-20 years ago, but no one had the foresight or political clout to do anything about it. What Xi has done, however, is bring politics back into the fold in China.
Much like Mao in the mid-60s—fearing that the CPC was losing its grip on the population—decided to fuck things up with the Cultural Revolution.
Granted, in Xi’s case it hasn’t been quite as bad (yet), but the censorship, the oppression, and the propaganda, have been ramped up during his tenure. Anything that doesn’t adhere to the traditional values of communism has been scrubbed at an increasingly fast rate.
The crackdowns in China’s tech sector have been ideologically driven, and it has been incredibly disruptive for China’s most agile and competent privately-driven sector, far more than the tech war with the US. Wolf warrior diplomacy siding with Russia and creating an ‘alternative’ global order are all based on a very absurd and quite unrealistic idea of China’s power, or at least the power they think they have.
People who have lost their jobs during and after covid have a hard fucking time finding a new one. We’re seeing salaries being pushed down HARD, especially for new graduates, and the number of unemployed youths is so bad, that they simply stopped releasing the data.
Just like we can be sure something isn’t true until the Kremlin has denied it, so can we be sure something isn’t bad in China until they scrub the existence of it.
Talk to anyone on the streets of Beijing, and they will tell you things are tough right now. And people in Beijing are the ones who are the lucky ones.
I mean, sure, we will still see new fancy stores opening up, office building being built, and fancy G63 AMG’s on the road. But that doesn’t mean things are well for the 1.4 billion people in this country.
Whenever we look at broad questions like this, we tend to view our own (highly anecdotal) bubble as proof that something is either good or bad. The overall prognosis for China is bad, really bad.
But that doesn’t mean it will “collapse.” Not even Russia has collapsed after having the toughest sanctions in history slapped on their Italian-sized economy.
It just means we’ll see years, perhaps decades, of negative growth in China, increasingly authoritative measures taken by the government, more protests, more suppressed protests, more people with opinions disappearing, more brain drain, more kindergarten stabbings, more music with revolutionary themes removed. Year by year, things will be a little worse off than the year before. More people will give up and lie flat. The only movies in the cinemas will be about the Korean War, and the only things on TV will be anti-Japanese shows or wuxia palace dramas.
It will be a descent into authoritarian conformity. In a sense, this is also a collapse.
I don’t know shit about China’s economy but every fucking word that dude wrote is absolutely true about America’s economy so I’m going to guess this is just once again, blatant projection by China haters.
Actually it is worse here because the commercial and residential real estate bubbles are out of control and overdue to explode, so if China just has one of those issues they are way ahead of us.
Also lol imagine thinking modern western economics outside of Marx is real, what a loser
Edit: also, haven’t these morons been saying China’s economy is crashing any day now for the past four years? Something about Evergreen? Why would anyone still be listening to them after four years of being wrong every day?
It’s the opposite actually, the clown is complaining that China does not have such a bubble anymore, that they’ve been deliberately deflating it over the past few years and allowing housing prices to come down. The idea of liberal China critics is that housing prices are supposed to constantly inflate because people in the West use housing as an investment asset and if their price were to collapse it would be bad. This is the height of liberal idiocy, not a thought given to the enormous problem that exists in the West of housing having become essentially unaffordable for young people due to this toxic speculative economic relationship to housing that their societies have.
I’m glad someone knowledgeable came around, thanks for explaining it.
Yes. Housing prices coming down in a controlled and steady manner that doesn’t outright collapse the economy is actually the ideal situation but that’s only possible with planning and government involvement. When supply is adequate for demand prices will decrease to what people can afford. This is part of why you don’t see many homeless people in China. That’s basic economics innit?
True. But in my opinion (and this is just a personal opinion, not necessarily an informed policy recommendation) the ideal would be for supply not to be merely adequate to demand but always just slightly higher than demand. That way you will have a safety margin and room for growth (in fact building housing first arguably could incentivize growth, just like building infrastructure - as the old saying goes: “if you build it, they will come”).
And i would apply this principle to other things too, not just housing. For instance the pandemic has shown us that it is a good idea for countries to have stockpiles of certain supplies for unforeseen emergencies. This is of course antithetical to the entire logic of capitalism where redundancy and stockpiling are highly disincentivized (“just-in-time” supply chains) and supply always trails demand to keep prices and profits high.
It’s quite rich to project a forecast of collapse on an economy that hasn’t collapsed in 20 years from an economy that can’t go more than a few years without collapsing.
For at least 20 years there’s been dipshits saying China is going to collapse at any moment