January 1, 2025 - 2:00pm
China’s economy has become something of a Rorschach test. The 5% growth target for 2024 that Xi Jinping yesterday said the country had met? One set of economists looks at it and says the economy is collapsing, the figures are probably fudged, and that a recession is likely to begin this year anyhow. The other side says the government is probably right, and that while Beijing’s economy is slowing, these problems may be overcome in 2025. They can’t both be right, even if they both have a point. But the camp to which you belong to appears to be determined by where you sit.
Western analysts, using aggregate data and a liberal interpretative lens, tend to see China’s economy as beset with insurmountable structural obstacles embedded in Communist Party rule. Because the leadership is reluctant to give more political power to the people as their incomes rise, the CCP persists with an industrial development model based on repressing wages to boost investment in export-manufacturing industries. Unable as a result to break out of the middle-income trap, which would require shifting towards an economy based on domestic consumption, the regime has consequently left itself vulnerable to the coming wave of Donald Trump’s tariffs. Then, the thinking goes, the economy may enter a real crisis.
However, economists based in or near China — even when working for Western firms — tend to eschew such pessimism. Observing close-hand the extraordinary innovation and dynamism of Chinese firms, and the rapid emergence of new sectors which are out-competing Western rivals, they’re more inclined to think the Chinese are capable of rising to these challenges. But if they agree that the country can continue to grow at the rate targeted by the regime, they’re not yet sure it will.
The basic challenge is that China has more or less saturated the world market with its products, and now accounts for about a third of the planet’s industrial output. As the phenomenal growth of its manufacturing sector has come largely at the expense of its trading partners, notably but not only Western countries, there is little appetite among other countries to keep absorbing more of China’s surplus. So if the rest of the world puts limits on how much it will buy from Beijing, the Chinese will have to start consuming more of their own output.
This is broadly agreed to be the crux of the matter. The split into camps occurs over whether Beijing can engineer that transformation. Sceptics doubt the Communist Party under Xi will ever countenance a “welfarist” model which allows its citizens more economic power. They point to the long list underwhelming announcements, and to policies which continue to favour supply-side stimulus, such as industrial and export subsidies.
But word on New Year’s Eve that civil servants had received a pay rise may hint that the government is finally preparing bolder measures than before. While the CCP’s proposed demand-side stimulus measures have so far remained relatively conceptual, they may nonetheless indicate a new direction of travel.
The leadership will probably wait until Trump takes office later this month and launches his first move against China before revealing just how far it will go to stimulate the economy with domestic consumption. But for now, it’s probably best to hold off the obituaries for the Chinese transformation. Reports of the death of Chinese growth are likely to be greatly exaggerated.
John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a religion (Simon & Schuster, 2017).
jarapley
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SubscribeThe first true indication of any collapse will be at the expense of Taiwan. The CCP will then have something to blame other than their own over-rapid industrial expansion and aggressive exports. Naturally, it will be entirely the fault of US empire building, US unprovoked economic warfare, or some such nonsense. An external enemy daring to challenge China’s right to invade Taiwan would be a typical autocratic response to an own goal.
Rather than China needing an external scapegoat, the U.S. might exploit Taiwan as a pretext to curb China’s rise.
So Chinas economy will overcome the deep structural problems facing it, simply because it gave some civil servants a pay rise? Seems a rather flimsy pretext for such a prediction
Be fair – Starmer and Reeves are trying to pull the same stunt here !
Yes, the author didn’t address the population problem China faces: a large cohort of the population is moving into retirement and will have to be supported (thanks to the one child policy) by a much smaller cohort. Also the West seems to be losing its enthusiasm for the kind of ‘neo-liberal’ globalisation that we’ve seen for the last 40 years, and which has benefitted China so much.
This is the gist of west mindset problem:
“Unable as a result to break out of the middle-income trap, which would require shifting towards an economy based on domestic consumption, the regime has consequently left itself vulnerable to the coming wave of Donald Trump’s tariffs. Then, the thinking goes, the economy may enter a real crisis.”
There is no trap in middle income. China is NOT consumption culture. Stupid consumption is what got here buying cheap, obsolescence products, that destroy the beautiful earth.
I think the world needs to question what is profit? What is growth? What is lowering cost? And what is the ultimate goal of economy? What is economy????
China power is steady, harmony and cooperation not just cost cutting without knowing what, profit driven without end, and full employment and then….innovate with full stomach, less stress mind and see what is out there!
We, the people not the billionaire need to set the agenda once and for all.
If China is so into harmony and all this good stuff, you’re going to need to persuade me why they’re producing all these “cheap, obsolescence products”, since it’s their own beautiful earth that will be destroyed in producing them.
And if China isn’t a consumption culture, please explain why it’s such a huge market for Western luxury goods.
That’s nonsensical. There’s no point to an economy EXCEPT to generate consumption. If an economic activity doesn’t give the people more consumption of goods or services, it’s pointless.
Hence China’s abject failure in creating 80 million empty housing units, and vast networks of high speed trains that are barely used. Those things are not economically productive, because no one consumes their services, and therefore China’s growth has been massively overstated. You might as well dig holes and fill them back in.
Here we go again
A complete lack of Understanding
As to what China is and how The West reacting.Even The Experts who are stating that China is meeting it’s targets but give the game away by seriously doubting China shall continue to meet the Targets it sets for itself by way of
Governance and 5 year plans
Time and Time again I state go study China’s 5000 year history
And once you have done so you must now then go on to study Buddhism , Zen Buddhism and Confuciousism
Then and only then can you possibly understand of what I say next
But once more you must complete your education by way of Study of the Four Volumes ( over 2600 pages ) of Xi Jingping and The writings contained in The Governance of China .
And just if you Basically want to study how a Internal Combustion Engine works
Then fundamentally all you require to understand is the principle of how it works once you reach that level
You can maintain any repair any Internal combustion Engine
So a 4 stroke engine consists
Of 1 Induction 2 Compression
3 Ignition 4 Exhaust
Know the firing order and when the cylinder that fires first you then find out where Top dead Centre of that cylinder is just before the Inlet valve to the cylinder is seating and about to close
Absolutely everything else with regards that engine is built and engineered around that
Now for China
A ) Buddha all his adult life debated
With the Leading Hindu cleric
Who insisted that Man and society required Rules
Buddha completely disagreed stating that every Human knows what’s right and wrong being born instinctively with such Wisdom and knowledge
When the Hindu cleric got news that Buddha was dying the cleric immediately departed to go and see Buddha
When he arrived and after a long debate The Cleric departed saying
I’ll never accept there no rules
Buddha retorted Oh there never can be any rules
And as the Cleric opened the door to depart Buddha cried out WAIT
Then said there are rules but only
Two
The cleric then asked well what is the first rule
Buddha informed him
Do nothing to harm the ground upon which you stand, Nor the air that you breathe and the waters you depend upon
The Cleric then Asked why is that so
Buddha replied that the second rule is That never shall there be enough even for just One Man’s greed
But always enough for everyone’s
NEEDS
Now you ask what the hell is this got to with China
Well from Buddhism , Zen Buddhism and Confuciousism you will soon find
That these 2 rules are Paramount
Then if you go and find out what the 5 yellow stars represent then you discover what modern China is all about
So let’s jump to the central principles of the 4 volumes of
The Governance of China
And time and time again reference is made to the following
1. For the New era
And
2 ) Building a modern moderate
Prosperous Society
Now with regards a New Era go look at how Western Colonialism
Looted and plundered the rest of the World
Then Neo Liberal Capitalism endeavour to continue with such plunder by way of the Hegomonic
$ and the so called World Order
Then explain how E.Musk is earns more in 1 yr which is more than the combined GDP of 124 Nations
And another rich elite hedge fund manager ( Spiv ) by way of his large private airliner spews out in one year more CO2 than 2.8.million
Average Western families do
And 29.million.Western poor families
Surely given all I state what China means by New Era and Moderate prosperity
If not you are either brainwashed or have a closed mind or just plain stupid
If you ain’t got it then explain how the hell can mankind possibly survive far less prosper and thrive
As Margaret Thatcher said
Thier Is No Alternative ( Tina )
But not in a manner that’s off any relevance today
She tried to create a New Era one that has failed spectacularly so
China’s New era won’t fail
Why because if does we all fail
70 years ago I was fired up reading all that similar sounding stuff about the CCCP.
Anyone who follows China would agree with this article. Far far from being buried despite the US led anti-China program. The negative China propaganda is ‘cold-war’ and many get sucked in to believing. China plays the long game. Policy is determined by solid long-term planning rather than 4 year election driven decisions. And they are nimble to challenges as seen by the accelerated and successful home-grown chip industry. And look at Huawei!