With Xi Jinping’s stunning shift back into Maoist totalitarianism, China is destined to become an economic mess once again. China’s opening to the world economy, particularly to the U.S. and Europe, now looks to be over. A new communist dark age will soon descend.
In China’s 20th party congress, which ended last weekend, we saw a very ugly glimpse of the future for the Middle Kingdom.
Not only did Xi cement his position as absolute ruler of the nation of 1.4 billion, but showed he’ll do anything to keep power. The image of an aging former President Hu Jintao apparently forcibly being led out of the congress by security is an ominous statement of what Xi has in store for the entire nation.
Faced with the sudden shock of what’s to come, China’s financial markets crashed on Monday, as investors realized that it’s no longer the promised land but now a prison-house economy in decline.
It was just 2014, a mere 8 years ago, that liberal Nobel Prize-winning economist Joseph Stiglitz heralded the advent of the “Chinese Century.” He and other leftist intellectuals fell in love with the notion of what could be accomplished economically with an authoritarian regime such as Xi’s.
No more saying no! No more dragging your feet! The government can do what it wants, without having to worry about all those pesky free-market naysayers!
The New York Times’ Thomas Friedman summed up this thinking best when he mused on Meet The Press back in 2010:
“I have fantasized — don’t get me wrong — but that what if we could just be China for a day? I mean . . . where we could actually, you know, authorize the right solutions, and I do think there is a sense of that, on, on everything from the economy to environment.”
Elsewhere, he enthused over “one-party autocracy” ruled by “enlightened” people, such as China. This is a classic “progressive” vision.
Since those remarks, China’s “growth miracle,” built largely on trillions of dollars of U.S. trade and investment and greater openness to the world, has come to a grinding halt. From high-altitude GDP growth averaging 10% a year for over 20 years, China’s growth has descended sharply.
The most recent forecast by the IMF sees 3.2% GDP growth this year, well below the Chinese government estimate closer to 5%.
But there are signs of even deeper trouble. Not only is GDP growth falling but, because of its massive debt (290% of GDP, a stunning level), plunging demand for Chinese goods, and a weakening yuan, China’s struggling.
China’s once-torrid real estate market, inflated by Chinese government loans, has crashed. So has the Hang Seng Index, the Hong Kong-based stock market gauge that is off a whopping 35% this year. It fell 8% just this week, as news of the newly-empowered Xi Jinping’s restoration and his signaling that communism isn’t dead scared investors.
In explaining the recent drop in stock prices, even CNN has noticed.
“A number of senior officials who have backed market reforms and opening up the economy were missing from the new top team, stirring concerns about the future direction of the country and its relations with the United States,” CNN reported.
In short, China’s bold experiment with open-markets and capitalism has ended.
As the Finbold financial news site noted: “The Chinese economy is experiencing a near-complete collapse. Nearly half a million customers have lost their deposits as the banks lent indiscriminately to housing developers who are now facing cascading defaults. Here’s the story the Chinese Government doesn’t want you to know.”
With an estimated 70% of Chinese citizens’ wealth tied up in real estate, and a fast-aging population, it’s a very big deal.
Like it or not, U.S. policy, so helpful and accommodating for 40 years as China opened to the world, has now undergone a reversal.
It started under President Trump, who slapped tariffs on many Chinese goods, challenged it on COVID-19, Taiwan’s independence, territorial expansion in the South China Sea, and human rights.
But the new Realpolitik toward China hasn’t ended. Congress’ just-passed Chips and Science Act imposes strict controls that limit China’s ability to “purchase and manufacture certain high-end chips used in military applications”.
Meanwhile, the $52 billion bill heavily subsidizes U.S. chipmakers for avoiding China.
“This is what annihilation looks like: China’s semiconductor manufacturing industry was reduced to zero overnight,” tweeted one Chinese entrepreneur.
U.S. chip and semiconductor equipment makers, fearful of the consequences of breaking the new export control law, are already downsizing to escape possible sanctions. China was counting on its chip industry to lead it into the future; now that looks doubtful.
Why is all this happening? China’s ills are a direct result of Xi Jinping’s reversion to stultifying Marxism. Here’s what Xi himself said at the recent party congress, where he won a third five-year term as China’s all-powerful leader.
“Over the past decade, we have stayed committed to Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the Theory of Three Represents, and the Scientific Outlook on Development, and we have fully implemented the Thought on Socialism with Chinese Characteristics for a New Era as well as the Party’s basic line and basic policy,” he said.
So, yeah, China’s good times are over.
As China’s population shrinks and it lapses back into its old Communist bad habits, maybe we’ll stop seeing foolish headlines in western publications predicting that China’s economy will soon “leapfrog” the U.S.
Sorry, but even with the U.S.’ many economic problems right now, China will never pass us up.
As we wrote back in 2014: “Not only has China not passed the U.S., but it’s quite possible it never will. China’s population growth is heading for a dramatic Japan-style collapse, which will slash economic growth dramatically in coming years. Growth has already slowed from 10% a year in the 1990s and 2000s to 7% — and it’s likely to fall further from there.”
We’ll stand by our prediction. How many economists will stand by theirs?
One of the last sentences is not explained – “China’s population growth is heading for a dramatic Japan-style collapse, which will slash economic growth dramatically in coming years.” Why is China’s population growth expected to decrease, apparently substantially??? It would be really nice if the reasoning behind ALL the predictions the author has made…
Thanks for the comment.
Since the 1970s, China has had a “one-child” policy in place. For four decades, family size was punitively limited. Have an extra baby, and bad things happened. The result was predictable: China’s fertility rate has plunged way below 2.1 live births per mother, the so-called replacement rate for a population. Official data today say the Chinese rate is 1.6 or 1.7. Most demographers, even some Chinese ones, believe this is way too high. While the one-child law has been loosened, its impact will be felt for decades to come. And there are strong indications that families are not having many more children, even when they can. One Chinese demographer actually said the population estimate for China (1.4 billion), as a result of all this, is about 120 million too large. By the way, this is already showing up in a shrinking workforce, as this piece from Reuters and another from Twitter show. and (https://twitter.com/fuxianyi/status/1545668143816839170). The Shanghai Academy of Social Sciences, meanwhile, predicts China’s population will actually shrink this year for the first time since its 1950s famine (https://www.weforum.org/agenda/2022/07/china-population-shrink-60-years-world/). That famine, by the way, happened during Mao’s “Great Leap Forward” from 1958 to 1961, an economic and human disaster. So when Xi publicly claims ideological kinship with Mao, as he did last weekend, look out.
As a side note, remember the late 1980s? As with China, everyone predicted that Japan would soon own the world. Its economic model was simply too powerful. But Japan’s own baby bust doomed their economy, just as it will China’s. Fewer workers means less production means less GDP. It’s that simple. Moreover, China’s population is aging very fast. Older workers, while wise in many ways, tend to be less productive as they age.
So China faces an economic slowdown of epic proportions, made worse by the fact that the U.S., and Europe to a lesser extent, are disengaging from China’s export-led economy as Xi’s threats toward Taiwan, crackdown on civil society and return to earlier totalitarian models of control make China a less profitable and more dangerous place to do business. China’s population decrease will be real, and it will be painful for China, which had gotten used to growing 10% a year.
Hope this helps. If you have further questions, or if your question hasn’t been answered to your satisfaction, let us know.
Thank you so much, Mr. Jones, for that really great explanation!!! I apologize if my comment was on the harsh side – I just really hate when statements I see as potential bombshells aren’t explained, so forgive me. I very much appreciate your taking the time & going to the trouble to explain China’s population & economic situation re. decreasing population “growth”…
This info truly is a bombshell, in a number of ways, and will have repercussions globally, as you point out. I should have thought before I commented originally, but perhaps you or others on I&I have explained this in an article or 2 earlier, and which I’d missed? If not, an article just about that would be extremely valuable information for many readers – especially in light of all the other things going on globally, like The Great Reset, which is (deliberately) affecting the entire global population and economy in many ways…
Also, what impact might the Chinese population decrease, and anticipated economic contraction from both that plus pulling out of China by “western” markets and now Xi’s declaration of a return to more Maoist/Marxist type communism, might have on the CCP’s Belt and Road Initiative? Do you, and/or others at I&I predict that the BRI will be a bust for China now, or a “saving grace” that might keep their economy afloat, despite their extreme indebtedness? Is it forecast that the peoples of the BRI nations will now (grumblingly) welcome the influx Chinese workers into their nations & communities, seeing as the potential Chinese economic input into their economies (will there still be Chinese economic input into their economies?) may be the only kind that some of these nations may experience for some years? And, to whom is the CCP indebted?
Lots to think about and contemplate! Thank you, again!
Mr. Jones, is it not true that, thanks to the one baby policy, there is now a huge shortage of women of child bearing age?
The late University of Maryland economics professor Julian Simon predicated all of this is the early 1980’s, and I am sure the Terry Jones is aware that he also noted that to have a thriving economy you have to have an increasing population.
I believe Xi thinks he can survive by increasing domestic demands for goods, but that is going to be difficult if people have scarce finances.
China has gone from go out and make money to distribution of income. It is all good for the West. They forgot what took them to the dance
Will it be “good for the West”, though? With the populations and economies of “western” nations being deliberately destroyed by the cronies of the World Economic Forum in their utterly mad (and futile) attempt to usher in a One World Government, under their control of course, how will “western” nations be better off with China’s return to Maoism/Marxism? The manufacturing bases of “western” countries has been, and is continuing to be, destroyed by moving these capacities to China and/or just killing them off directly. Do you envision a return of capital to “western” nations, and concomitant return of manufacturing capacity, in light of Xi’s declaration? Manufacturing in “western” nations requires the evil use of evil “fossil fuels” and thus release of evil CO2… What will the rabid and reality-denying greenies, and their backers, do in light of this reality? Will we finally – finally – please God – see the “man caused” climate change “crisis” hoax put to bed? Just trying to wrap my head around things…
There was no “reply” button to your earlier post regarding the Belts and Roads Initiatives. I really thought that was a tremedously insightful question and I hope Mr. Jones will have an opportunity to give his thoughts and/or answers to your BRI questions. I think answers regarding that affect China’s future and our relationship to China in the future.
Mark Stevens – I couldn’t respond to your comment, either! So, a “bug” in the system…?
I just wanted to say Thank You for your comment! The BRI is a major deal – the CCP’s plan to steal control over many other countries through debt traps is a huge concern, and has not been addressed seriously nearly as much as it should be.
For instance, what happened to Uganda earlier this year when they couldn’t make the first payment on their loan to upgrade & expand the airport at Entebbe.. Of course, the CCP would not renegotiate the terms or agree to more time! So, for a landlocked country like Uganda to lose control over their main airport is essentially “game over”. I’ve read a bit on how the CCP “infrastructure” loans & projects in other countries through the BRI has led to much unhappiness in the populations of those countries, as the CCP brings in Chinese peoples to work these projects, instead of using local populations. And, what are the terms of these BRI agreements??? There’s been very, very little written about that. And, perhaps not a lot is known about such terms, but at some point, more’s going to come out. We need to be on top of that.
There are many reasons to be concerned re the BRI agreements, and with Xi’s now record 3rd term and his announcement of now “returning” to Maoism/Marxism, how will the BRI and the administration of the BRI factor into things MUST be addressed… Just looking at a map in Wikipedia (yeah, I know Wiki’s not to be trusted, but I had to start somewhere), nearly one half of Earth’s land surface is locked into or “considering” BRI agreements to some degree. That is dam [sic] scary!
I hate that a Chinese economic collapse would hurt the non-communist people of China ( not to mention the rest of the US & other nations), but I truly hope that it would cause China to have to withdraw their tentacles from the rest of the world, that is, make them turn within and thus killing their international (takeover) ambitions.
A reader responds:
I’m an old white guy, and my wife is Chinese. (I married her in mainland China, subsequently obtained a “Green Card” for her, and then brought her to the U.S. Three years later, she became a naturalized U.S. citizen.) We have visited China many times, seeing the sights and visiting her relatives. At those times, some couples actually did have more than one child. Although “one child” was the official policy, it was not enforced uniformly. In some jurisdictions, you would just pay a one-time “fine” for having a second child. In some places, the “fine” was often paid even before having the child, and was really more of a license fee.
I truly love my in-laws, and we have been wanting to go back and visit again, but those days are gone and we have been very concerned about where China is headed. Specifically, I have been feeling for several years now that Xi is the worst thing that could happen to China. In some ways, he is an idiot, in that he “doesn’t know what he doesn’t know”. He wants to be another Mao Zedong. He seems to be succeeding, and if you consider Mao to be evil …
(Please don’t publish my name, as I am worried about my in-laws in China.)
China’s economy may be slowing. But so are the economies of the USA, EU, UK, Russia, Japan, etc. In a worldwide economic slowdown, the winner is the economy that slows down the least. The USA is certainly a mess with crime, drugs, woke-ism, etc. A race to the bottom perhaps, which will be accelerated as the world retreats from free trade. But is that not the goal of the WEF, and the path the USA is on with climate change and the war on fossil fuels replacing COVID as the means/excuse to slow economic growth? I suggest Cheryl Chumley’s column for a deeper dive:
Slowing fertility and population growth rates are also not limited to China. Japan and the EU are also slowing below replacement levels. As to China’s one child policy, this was an indirect outgrowth of the Marxist ideology banning religion (opiate of the masses argument, etc). The Dalai Lama of Tibet has talked about this, looking back decades after a 3-year stint in China where he had daily discussions on socialism, religion etc. with Chairman Mao. The story he told was that Mao felt Buddhism with its monastic tradition and monasteries was siphoning off too many men and slowing population growth. Without the monasteries naturally regulating population growth, China’s population exploded over the next 30 years, necessitating the one child solution which wrecks family structure. Japan is very candid about the bad effects of one child families, as aging parents lack sufficient family to care for them.
Personalizing this, blaming it all on one person, be it Xi, Saddam Hussein, Biden, Putin, Trump or whomever is a peculiar Western game. Under Bush II, we were always one assassination away from winning over Iraq (first certain generals, then Saddam’s sons, etc). Same with Libya under Obama and Hillary, the game was kill the leader, and the outcome was the same: chaos. Not a winning strategy. If China takes over Taiwan, it will be as much as geopolitical necessity to get the Taiwan semiconductor technology being denied it because Taiwan follows USA sanctions. Even if not Xi, denied a key resource China will be forced to take actions. In lead-up to WWII, USA cut off Japan from foreign oil and resources, which gave militants upper hand to go to war. Reality and necessity prevail over persons or personalities.