Several day's ago Wall Street Journal had a very comprehensive look at China's economy. This has been much commented on in the news and business press. I've posted a few paragraphs below the link.
The economic model that took the country from poverty to great-power status seems broken, and everywhere are signs of distress
What worked when China was playing catch-up makes less sense now that the country is drowning in debt and running out of things to build. Parts of China are saddled with under-used bridges and airports. Millions of apartments are unoccupied. Returns on investment have sharply declined.
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Economists now believe China is entering an era of much slower growth, made worse by unfavorable demographics and a widening divide with the U.S. and its allies, which is jeopardizing foreign investment and trade. Rather than just a period of economic weakness, this could be the dimming of a long era.
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The outlook has darkened considerably in recent months. Manufacturing activity has contracted, exports have declined, and youth unemployment has reached record highs. One of the country’s largest surviving property developers, Country Garden Holdings, is on the cusp of a possible default as the overall economy slips into deflation.
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Unlike Japan, however, China would be entering such a period before reaching rich-world status, with per capita incomes far below more advanced economies. China’s national income per person reached about $12,850 last year, below the current threshold of $13,845 that the World Bank classifies as the minimum for a “high-income” country. Japan’s per capita national income in 2022 was about $42,440, and the U.S.’s was about $76,400.
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The transition marks a stunning change. China consistently defied economic cycles in the four decades since Deng Xiaoping started an era of “reform and opening” in 1978, embracing market forces and opening China to the West, in particular through international trade and investment.
During that period, China increased per capita income 25-fold and lifted more than 800 million Chinese people out of poverty, according to the World Bank—more than 70% of the total poverty reduction in the world. China evolved from a nation racked by famine into the world’s second-largest economy, and America’s greatest competitor for leadership.
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The most obvious solution, economists say, would be for China to shift toward promoting consumer spending and service industries, which would help create a more balanced economy that more resembles those of the U.S. and Western Europe. Household consumption makes up only about 38% of GDP in China, relatively unchanged in recent years, compared with around 68% in the U.S., according to the World Bank.
Changing that would require China’s government to undertake measures aimed at encouraging people to spend more and save less. That could include expanding China’s relatively meager social safety net with greater health and unemployment benefits.
Xi and some of his lieutenants remain suspicious of U.S.-style consumption, which they see as wasteful at a time when China’s focus should be on bolstering its industrial capabilities and girding for potential conflict with the West, people with knowledge of Beijing’s decision-making say.
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Instead, guided by a desire to strengthen political control, Xi’s leadership has doubled down on state intervention to make China an even bigger industrial power, strong in government-favored industries such as semiconductors, EVs and AI.
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Last week, just as Beijing released a barrage of disappointing economic data, the party’s premier journal, Qiushi, published a speech made by Xi six months earlier to senior officials, in which the leader emphasized the importance of focusing on long-term goals instead of pursuing Western-style material wealth. “We must maintain historic patience and insist on making steady, step-by-step progress,” Xi said in the speech.
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