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China’s economy isn’t slowing — it’s collapsing

China is experiencing a serious economic downturn. Credit: Getty

September 11, 2023 - 9:50am

The news that a senior Westminster aide has been arrested on suspicion of spying for China has come as shock — though surely not a surprise. It is in the nature of rival powers to spy on one another. 

That said, it is unlikely that there are any British spies at work in the National People’s Congress in Beijing. After all, what would be the point? Though the world’s biggest legislature has 2,980 members, it is just a rubber stamp for the country’s communist leadership.

If there’s one thing worse than a one-party state, it is a one-man state — especially if that man is a control freak like Xi Jinping. According to a report in the Wall Street Journal, “[Xi’s] centralization of power is delaying the country’s response to its worst economic slowdown in years.”                                    

Officials are especially worried about the teetering property market, which the WSJ authors describe as the “biggest drag on growth”. In fact, what we’re seeing in China is no ordinary downturn. Rather, the wheels are coming off the country’s entire economic model.

It turns out that pumping unlimited amounts of capital into a construction boom has its limits. China may be a communist state, but that doesn’t make it immune to certain realities. As such, serious consequences are unfolding — like the collapse of Western investment. Just look at the following chart, from Axios, which shows the rise and fall of dollar-denominated Chinese property bonds (i.e. a way for outsiders to invest in China’s once-booming property market). Worth over $150 billion dollars just a couple of years ago, their value has since plummeted to $33.8 billion.

Credit: Axios

If President Xi insists on blocking necessary reforms, then things will go from bad to worse. Just how much worse is hard to say. To borrow from Zhou Enlai’s supposed verdict on the French Revolution, it is too early to tell. Nevertheless, we can’t take China’s economic stability for granted. A country that suddenly stops publishing its dire youth unemployment statistics does not command confidence.

Even if we discount the possibility of war over Taiwan or some other flashpoint, the West must stop betting its own economic future on the continuing competence of the Chinese Communist Party. At the weekend’s G20 summit in India, Giorgia Meloni signalled her intention to pull Italy out of China’s Belt and Road Initiative. This is an example to other Western leaders — who must do more to untangle their economies from the global web of supply chains controlled by Beijing. 

The recent discovery of what could be the world’s biggest lithium deposit, in the United States, should serve as further inspiration. Lithium is vital to our high-tech future – and so this is just the sort of opportunity to make the most of. Indeed, the nations of the West must work together to build up our collective economic security. 

That doesn’t mean that we shouldn’t strive for friendly relations with China; but it does mean ending our dependence on a potential foe. 


Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.

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Jim Veenbaas
Jim Veenbaas
10 months ago

I don’t pretend to know much about the Chinese economy, but I’m always skeptical of articles pronouncing its imminent collapse. It made me chuckle when the author mentioned the lithium discovery in the US. There’s maybe a 10% chance that deposit is actually developed. China would have shovels in the ground yesterday.

Thomas Wagner
Thomas Wagner
10 months ago
Reply to  Jim Veenbaas

I don’t know how you can say we aren’t at work on the lithium deposit. Right now, talks are underway on creating the proposal to engage the consultants who will prepare the initial environmental impact proposal to be submitted to a committee of experts to be refined before sending it to the Federal and State authorities to prepare the way for applications to begin mining to be submitted.
Bureaucrats, both private and government, are very, very busy. So busy, in fact, that one actually stayed at work until 5PM one Friday. So work is in progress. The shovels come later.

Jim Veenbaas
Jim Veenbaas
10 months ago
Reply to  Thomas Wagner

Love it TW.

Justin Clark
Justin Clark
10 months ago
Reply to  Thomas Wagner

oh that gave me pleasure reading! thank you

Jerry Carroll
Jerry Carroll
10 months ago
Reply to  Thomas Wagner

Do you know how many enemies you have made of dug-in bureaucrats at every governmental and NGO level? Do not go out alone at night unless armed and with a pit bull.

Peter Johnson
Peter Johnson
10 months ago
Reply to  Thomas Wagner

Unfortunately the local indigenous people have just remembered that the mine is located in a ‘sacred’ valley. As well Greenpeace and the WWF say that a slimemold on the verge of extinction grows only in that valley! What tough luck.

Jim Veenbaas
Jim Veenbaas
10 months ago
Reply to  Jim Veenbaas

T

Last edited 10 months ago by Jim Veenbaas
Robert Hochbaum
Robert Hochbaum
10 months ago
Reply to  Jim Veenbaas

I’m with you on the ‘collapsing’ stuff. Meanwhile over at the NYT:
“China Is Flooding the World With Cars”
From the story:
“Shipyards along the Yangtze River are building a fleet of car-carrying ships that act as giant floating parking lots, capable of carrying 5,000 or more cars at a time. The Jinling shipyard in Yizheng, a town near Nanjing, “is busy around the clock, there are night shifts every day,” said Feng Wanyou, a ship welder, during a lunch break.”
Collapsing away….

Dumetrius
Dumetrius
10 months ago

That may be because China has an overproduction of excess cars they can’t store. There’s a huge impromptu car park in Hangzhou that’s full of them.

Last edited 10 months ago by Dumetrius
Peter Johnson
Peter Johnson
10 months ago
Reply to  Dumetrius

When you use super cheap coal fired steel mills and power plants – plus slave labour – you can churn them out like hot cakes.

Justin Clark
Justin Clark
10 months ago
Reply to  Jim Veenbaas

I’m a retail investor in typically African lithium projects… these are huge and Chinese industrial-driven… Amazing returns when you have such focus on extraction and processing…One of them finished drill test results and six months later had a fully-functioning plant… with 3 more planned…(Yes last September it was just bush area)… The Chinese move quickly in Africa… https://youtu.be/aqwcZIgLokY?t=63

Last edited 10 months ago by Justin Clark
Stan Konwiser
Stan Konwiser
10 months ago

Seems to me we should be more worried about the competence of Western governments than China’s. Our dear elected leaders haven’t been demonstrating much competence lately.

Kathy Hix
Kathy Hix
10 months ago

Demographic collapse is accelerating all over the world; fastest in China. This is going to undermine the consumption model that has driven 20th-early 21st century globalization. I suspect no one really knows exactly what is going to come next.

Last edited 10 months ago by Kathy Hix
Pete Marsh
Pete Marsh
10 months ago
Reply to  Kathy Hix

We need to employ Prof Ferguson at Imperial College to model what’s going to happen: They’ll probably predict 30 billion dead.

John Galt Was Correct
John Galt Was Correct
10 months ago
Reply to  Pete Marsh

And before Christmas.

Peter Johnson
Peter Johnson
10 months ago
Reply to  Pete Marsh

I am sure Bill Gates will have some technocratic solution. Mechanical mosquitos that block the Sun or something.

Prashant Kotak
Prashant Kotak
10 months ago

“…Even if we discount the possibility of war over Taiwan…”

Yes but why would you discount that possibility when every signal out of Beijing indicates China is preparing to attempt to absorb Taiwan into the greater China within the next half decade?

Arthur G
Arthur G
10 months ago
Reply to  Prashant Kotak

Because they don’t have anything near the amphibious capacity to do so? And would permanently hamstring their economic ties with the West?

Prashant Kotak
Prashant Kotak
10 months ago
Reply to  Arthur G

I don’t think either of those patent truths will stop Xi. Nationalism is the Chinese version of the holy crusade.

Dumetrius
Dumetrius
10 months ago

Zhou En Lai wasn’t talking about the French Revolution of 1789, but the one of errrr, 1968.

Edward Moore
Edward Moore
10 months ago
Reply to  Dumetrius

If he ever actually said it, he was talking about the French Revolution… hence why it’s so oft-quoted and treated with such amusement, feeding into the idea that the Chinese are master strategists and think in terms of centuries and not four-year election cycles (a somewhat overblown assertion in my opinion, based on my 12+ years of living there, but there you go.)

Dumetrius
Dumetrius
10 months ago
Reply to  Edward Moore

Edward Luttwak who writes here, has explained already that Zhou En Lai thought it was about 1968, and someone misinterpreted it as thinking he meant 1789, told Kissinger . . . tho HK knew it wasn’t true, he found it an appealing enough story to dine out on, and it suited his purpose in portraying the Chinese as master strategists.

Despite quite a lot of proof (even observed by me in my travels there) that the Chinese government has no such capacity, and if anything, in execution, they are actually worse than most other forms of government,

Last edited 10 months ago by Dumetrius
Charles Stanhope
Charles Stanhope
10 months ago

How very encouraging! Now that China has fulfilled its function as a gargantuan ‘sweat shop’ for western goodies, it is time to jettison it, and move on to the sub-continent.
As to:- “the West must stop betting its own economic future on the continuing competence of the Chinese”, what extraordinary wishful thinking.! Have we already forgotten the lethal fiasco of the so called ‘Great Leap Forward’ 1959-62?
No matter let us prepare for the ‘Great Leap Backwards’ and the very real possibility of War.

Andrew Dalton
Andrew Dalton
10 months ago

The “Great Faceplant?”

Kevin Gardiner
Kevin Gardiner
10 months ago

Isn’t this all a bit superficial – “Collapsing”, really?

j watson
j watson
10 months ago

Sclerotic dictatorships can survive for many years even with a ‘decaying’ economy. Look how long the Soviets survived. Ditto Iran and a whole host of similar regimes.
In fact Xi’s surveillance techno totalitarian State exactly for this – to maintain itself beyond all else.
What’s less clear is whether the ‘slide’ in the Chinese economy further incentivises Xi regarding Taiwan, or weakens the potential for a first strike. One suspects the former but that he might wait to see if Agent Orange gets back into the White House and the US goes into a major constitutional crisis leaving the CCP with a much strengthened and freer hand in the S China Sea.

Last edited 10 months ago by j watson
Right-Wing Hippie
Right-Wing Hippie
10 months ago

The recent discovery of what could be the world’s biggest lithium deposit, in the United States, should serve as further inspiration.
I for one certainly feel better.

Jerry Carroll
Jerry Carroll
10 months ago

China is the foe of the West, everything else is just detail.

UnHerd Reader
UnHerd Reader
10 months ago

Like more open societies need be any better.
https://www.theguardian.com/commentisfree/2023/sep/11/eu-green-subsidies-biden-no-money-no-common-treasury

The mode of government is irrelevant to this issue. It’s Xi’s dippy right-wing approach to the matter (e.g. welfare is bad) that’s preventing China responding. Read Brad Setser’s stuff.

Last edited 10 months ago by UnHerd Reader
Pequay
Pequay
10 months ago
Reply to  UnHerd Reader

A right-wing communist government? Wait, I’m confused.

UnHerd Reader
UnHerd Reader
10 months ago
Reply to  Pequay

Your confusion stems from the fact that the CCP is communist in name only. Hope that helps.

Peter Kingsford
Peter Kingsford
10 months ago
Reply to  UnHerd Reader

Isn’t that the trouble with communism? It sounds great on paper but inevitably progresses to an authoritarian/totalitarian system.

Last edited 10 months ago by Peter Kingsford
Dumetrius
Dumetrius
10 months ago

No the problem is that any ‘communism’ in it evaporates.

The authoritarian/totalitarian stuff is there at the start and goes nowhere.

Last edited 10 months ago by Dumetrius
UnHerd Reader
UnHerd Reader
10 months ago
Reply to  Dumetrius

Well, we can get into a typology of communism, but it’s hardly surprising the crap like Bolshevism and its derivatives resulted in the horror we know so well. But then look at the records of capitalist countries.

Dumetrius
Dumetrius
10 months ago
Reply to  UnHerd Reader

Yet, with all that, everyone migrates to capitalist countries, and virtually no-one goes the other way.
At some point you just have to trust the evidence, even if you don’t like it. It just ‘is’.

j watson
j watson
10 months ago
Reply to  Dumetrius

It’s liberal democracies they try to migrate to – it’s broader freedoms and not just economic freedom. And these are usually also capitalist but not rampant capitalist.

0 0
0 0
10 months ago

Not sure how one ‘sounds ‘ something on ‘paper ‘

Pequay
Pequay
10 months ago
Reply to  0 0

perhaps if the written word was read out? But I agree, not an elegant phrase.

Dumetrius
Dumetrius
10 months ago
Reply to  0 0

I wrote a book about cattle rustling. It was very easy to sound it on paper.

Last edited 10 months ago by Dumetrius
UnHerd Reader
UnHerd Reader
10 months ago

You’ll hear no defence of communism from me, friend. Or liberalism for that matter.

Kent Ausburn
Kent Ausburn
10 months ago
Reply to  UnHerd Reader

You are at least partially correct. They operate, in reality, largely according to a fascist economic model, although there are totally state-owned industry as well.

Jim Veenbaas
Jim Veenbaas
10 months ago
Reply to  UnHerd Reader

Subsidies are a lousy way to attract investment .