Is China’s Economy Doomed?

The data suggest it might be.

Written by Jack Elbaum

What’s happening: Despite concerns over the rise of China, data reported in the Wall Street Journal suggest the nation’s economic “boom” may be over.

The indicators:

  • Investments: Return on investment for private assets has declined more than 50 percent since 2017, while it has declined about 35 percent for state-owned assets.

  • Aging population: Projections also show there will be a decline in the working-age population due to a low birth rate, and productivity has dropped sharply.

  • Debt: Not to mention total debt has almost tripled China’s GDP as of last year, rising from less than double in 2012 and surpassing the U.S.

Why it’s happening: Chinese officials had a strategy of spurring growth through state-sponsored infrastructure projects, but they overbuilt. There are now millions of unfilled apartments and underused airports and bridges across the country. This suggests the strategy has run its course and China must find alternative ways to build economic prosperity moving forward.

  • Outside factors? Some believe America’s strategy of de-risking, or moving production away from China, has contributed to this decline. But data show U.S. trade with China remains strong. The decline is likely an inevitable result of China’s tightly controlled economy — a “homegrown crisis,” as the Council on Foreign Relations put it.

Why it matters: China is considered America’s top geopolitical rival and its top competitor to become the world power of the 21st Century. It increasingly looks like China will have to change course quickly if it wishes to remain so.

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