China’s Economy Is Spiraling

Chinese President Xi Jinping attends the third plenary session of the National People's Congress in Beijing on March 10, 2023. (Photo by Noel Celis/AFP/Getty Images)

“China is going to eat our lunch? Come on, man,” scoffed then-presidential candidate Joe Biden in 2019. Two years later, as president, Biden declared, “The Chinese are eating our lunch. They’re eating our lunch, economically. They’re investing hundreds of billions of dollars in research and development. … We got to compete.”

Mario Cuomo famously said that politicians “campaign in poetry, but govern in prose.” But in this case, the poet was closer to the mark. The Chinese economic rocket looks to be running out of fuel.

Chinese economic statistics have never been entirely reliable, but the last reported number for urban youth unemployment we have is 21.3 percent (it may actually be closer to 50 percent). One sign it will get worse: China recently announced it will no longer be publishing youth unemployment—or consumer confidence—-numbers.

China is also facing a ripening debt crisis and potential deflationary spiral. For decades, the Chinese government has encouraged real estate speculation and overinvestment. Millions of Chinese small investors and families responded by putting their eggs in the housing basket, which fueled massive bubbles, soaring home prices, and crushing increases in debt. Countless skyscrapers, airports, highways, even whole cities, are little more than white elephants thanks to state-directed overbuilding.

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