Beware a Faltering China: Beijing’s Assertiveness Betrays Its Desperation

Beware a Faltering China: Beijing’s Assertiveness Betrays Its Desperation. By Michael Beckley.

In March 2007, at the height of a years-long economic boom, then Premier Wen Jiabao gave an uncharacteristically gloomy press conference. China’s growth model, Wen warned, had become “unsteady, unbalanced, uncoordinated, and unsustainable.” The warning was prescient: in the years since, China’s official gross domestic product (GDP) growth rate has dropped from 15 percent to six percent — the slowest rate in 30 years. The country’s economy is now experiencing its longest deceleration of the post-Mao era.

A growth rate of six percent could still be considered spectacular. … But many economists believe that China’s true rate is roughly half the official figure. …

Practically all of China’s GDP growth has resulted from the government’s pumping capital into the economy. Subtract government stimulus spending, some economists argue, and China’s economy may not be growing at all.

The signs of unproductive growth are easy to spot. China has built more than 50 ghost cities — sprawling metropolises of empty offices, apartments, malls, and airports. Nationwide, more than 20 percent of homes are vacant. Excess capacity in major industries tops 30 percent: factories sit idle and goods rot in warehouses. … China’s debt has quadrupled in absolute size over the last ten years and currently exceeds 300 percent of its GDP. No major country has ever racked up so much debt so fast in peacetime.

In the 1990s and early 2000s, the country enjoyed expanding access to foreign markets and technology. China was nearly self-sufficient in food, water, and energy resources, and it had the greatest demographic dividend in history, with eight working-age adults for every citizen aged 65 or older.

Now China is losing access to foreign markets and technology. Water has become scarce, and the country is importing more food and energy than any other nation, having decimated its own natural endowments. Thanks to the one-child policy, China is about to experience the worst aging crisis in history, because it will lose 200 million workers and young consumers and gain 300 million seniors in the course of three decades. Any country that has accumulated debt, lost productivity, or aged at anything close to China’s current clip has lost at least one decade to near-zero economic growth. How will China handle the coming slump?

When fast-growing great powers run out of economic steam, they typically do not mellow out. Rather, they become prickly and aggressive. Rapid growth has fueled their ambitions, raised their citizens’ expectations, and unnerved their rivals. …

Labor protests are on the rise, elites have been moving their money and children out of the country en masse, and the government has outlawed the reporting of negative economic news. President Xi Jinping has given multiple internal speeches warning party members of the potential for a Soviet-style collapse. The government has doubled internal security spending over the past decade, creating the most advanced propaganda, censorship, and surveillance systems in history. It has detained one million Uighurs in internment camps and concentrated power in the hands of a dictator for life. State propaganda blames setbacks, such as the 2015 stock market collapse and the 2019 Hong Kong protests, on Western meddling. These are not the actions of a confident superpower. …

If China’s growth slows further in the coming years, as is likely, the Chinese government will probably double down on the repression and aggression of the past decade. …

Perhaps in a few decades, Chinese power will gradually mellow. Now, however, is a moment of maximum danger, because China is too weak to feel secure or satisfied with its place in the world order but strong enough to destroy it.