March 23, 2025 - 7:20pm
To borrow a phrase used by Mark Twain about his own erroneously reported demise, news of the coming implosion of the Chinese economy is much exaggerated. For three decades, analysts have worried about government debt, the country’s housing market, and weak consumption. But the much-feared collapse has yet to happen.
A newer element, however, is the imposition of wide-ranging tariffs from one of the country’s largest trading partners, with more action imminent. Premier Li Qiang claimed earlier today that Beijing is ready for any “unexpected shocks” as Donald Trump prepares additional levies on imports from China.
Despite Li’s upbeat talk, domestic consumption is still around 40% of GDP, a figure which hasn’t shifted for three decades. At the same time, rising public anxiety about restricted healthcare and pensions cover means that the urban-dwelling middle classes who work in the service sector are unlikely to put their hands in their pockets any time soon. As a result, tax revenue on income and goods remains low, and the central government is stuck in as much of a spending and budgetary bind as more politically liberal major economies.
Xi Jinping has made clear, using Western governments as a guide for what not to do, that the Chinese Communist Party is seeking to avoid the huge costs associated with social welfare. Ironically enough, Chinese socialism is far less generous to its own people when they are sick, retired, or unemployed than European or North American countries. The burgeoning costs for welfare in places like Britain or Germany help to explain this gap.
Faced with the challenges of an ageing population, as well as youth unemployment fuelled by a surplus of new graduates each year, Beijing is nonetheless persisting in its pursuit of growth. Developing new export markets in the Global South is one possible avenue here. After all, it’s far easier to deal with more straightforwardly transactional partners in Africa than working with Western nations and their declining demand. Li and his colleagues have also gone some way in rehabilitating the private sector after years of neglect at the expense of state companies. Last month, government officials expressed interest in providing more access to investment for private technology companies, while Xi himself met with leading business executives.
Hovering over all this, though, are the perennial issues of time and scale. Following the Covid-19 pandemic, Beijing knew it had a long way to go in upgrading its economic structure while still producing enough growth to placate its citizens. Now the Trump tariffs have complicated things: for all China’s advertised growth and technological advancements, no government can do the impossible.
And while Mark Twain was initially right about his obituaries, the day did finally come — alas — when they proved correct. Li has stressed that Beijing is prepared for whatever Trump has up his sleeve, and it’s true that there is not yet cause for panic about China’s economy. Still, the CCP now has a significant obstacle to its quest for growth.
Kerry Brown is Director of the Lau China Institute and Professor of Chinese Studies at King’s College, London. His latest book is The Taiwan Story.
Bkerrychina
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SubscribeWhat ? I know the internet is rotting our brains but this piece tells me nothing, expresses no discerable view or opinion. Its reads like glib observations thrown together after a few beers to meet a college deadline. Dumber then that even
*than* not ‘then’
I respectfully disagree with your comment. The author sets forth one view (correct or not) of China’s current economic situation and its ability to withstand US sanctions. I believe it tells us quite a lot, in a few words, about one analysis of China’s economy and the CCP’s ability and/or willingness to change its economic strategy.
The difficulty I have with this article is that a few days ago Unherd published an article arguing China was well placed to withstand US sanctions and really wasn’t worried about them. So who do we believe? In its effort to present a range of opinions, Unherd risks becoming a useless source of reliable, and actionable, information.
Having a wide range of opinions is a good thing, that way you can decide what direction you want to take. Besides, no one can predict the future accurately, there are too many possibilities and various potential outcomes. Forecasting is always biased in the direction that the forecaster would like to see as an outcome. That’s why most predictions are useless.
I believe what many people fail to understand—and what may require a different analytical approach—is that China’s strategy centers around the saving consumer, not the spending consumer. In contrast, the U.S. economy is built around consumption, where the consumer is defined by their spending behavior. If we describe a “weak consumer” as an insult or point of differentiation, we must first recognize that this terminology reflects the U.S. model, not the Chinese one.
Strategically, China and the U.S. represent opposing economic philosophies. Asking China to spend more is equivalent to asking Americans to stop spending—it goes against the core principles of their system. Therefore, we need a more intellectually nuanced analysis of how these strategic and philosophical differences function—not just in opposition, but potentially in cooperation.
We often focus on how these systems clash, but the real question is: how can they work together? Because one thing is clear—China will never fully abandon its savings-based model.
I wonder if most writers avoid focusing on these philosophical differences because, perhaps, there is a reluctance to let people here fully understand that there are cultures with fundamentally different values—such as prioritizing saving over spending. It may be that we don’t want consumers in our own culture to question why they are expected to spend while others are encouraged to save.
This hesitation might influence writers to avoid being too direct in their analysis. Hopefully, I’m wrong.
The beauty and the fear may be the tariff may result a saving consumers and they may be hard pressed to ever go back to mindless spending. Maybe that is the fear of all things China!
Once more you demonstrate unlike
99.9 % of So called Western experts
A good understanding of Not only
Modern China and it’s Governance
But more importantly so a understanding of China’s long 5000 year old history along with a basic
Understanding of Buddhism, Zen Buddhism, Taoism and Confuciousism
All of which are engrained into Modern China’s Modus Operandi
All the above take considerable effort by Westerners to even begin to understand what makes China Tick
Saving is deeply imbedded in Chinese minds and such is driven
By it’s long history , culture and belief systems
Along with family , unity , hard work and social responsibilities that makes the need to be prudent and always save
Which in turn meets the responsibilities that are central to the Chinese adhering to their beliefs
In short it’s vital that as those who grow old are guaranteed security
And shall not only be cared for but their lives remain happy and fulfilled
Once you understand these simple principles of Chinese philosophy
Then you soon realise how China deals with everything and drives it’s
Governance
Which, we are assured, does not explain why China is growing economically while the West stagnates.
Panic in China economy = blockade of Taiwan, or at least major disruption/checks on shipping in and out? We know that triggers a massive worldwide economic shock…at least.
It’s difficult to discern the Trump strategy. Help create the situation where Xi can justify seeking to realise his Taiwan promise having not helped reinforce Taiwan sufficiently first and weakened support from Allies does not seem overly intelligent? West loses Taiwan and the Renminbi supersedes the Dollar not long after a distinct possibility. At which point US in deep trouble with a massive deficit it can no longer service.
However at same time the CCP has undertaken economic warfare against the US and the West for some decades and that cannot be allowed to continue. The pushback though needs coordination and focus. Trump haranguing Canada, Europe etc, just seems to lack strategic thought and despite contortions pulled to try and clutch at a coherent plan it’s lacking. A cliff edge begins to come into view.