China's Bad Year

 I was reading Time Magazine's article about "The ‘walking route’: How an underground industry is helping migrants flee China for the US," which article discusses how Chinese illegal aliens are crossing our southern border and it mentioned the following:

    Many who left [China] point to a struggle to survive.

    Three years of Covid-19 lockdowns and restrictions left people across China out of work – and disillusioned with the ruling Communist Party’s increasingly tight grip on all aspects of life under Xi. Now, hope that business would fully rebound once restrictions ended a year ago has vanished, with China’s once envious economic growth stuttering.

    Others nod to restrictions on personal life in China, where Xi has overseen a sweeping crackdown on free speech, civil society and religion in the country of 1.4 billion.

    “We are Christians,” one neatly dressed middle-aged man said simply when asked what had led him there – a bare encampment thousands of miles from home.

It ties in with videos I've seen from YouTube channels like China Uncensored and China Insights over the manufacturing slump and real estate issues in China. But Strategy Page has a summary in its piece, "China Had a Bad Year." An excerpt:

    Last year was a Chinese bad year. For example, by mid-2023 Chinese manufacturing activity had shrunk for five months in a row. This was one of several indicators that the Chinese economy was in trouble. The problems are largely self-inflicted. The shrinking of Chinese economic activity is the result of several different economic problems, including consumers not resuming their pre-covid spending habits. Less consumer spending was not expected. None of this should be a surprise because all the problems have occurred in China before, but not all at once. Paying attention to Chinese history is respected and it is still a popular tradition to base major decisions on what has happened in the past.

    ... Xi Jinping has had some success and recently saw the Chinese banking sector improving to the point where it might actually assist in reviving the economy. The economy is still in bad shape, with too much debt, too many foreign companies pulling out of China, too many Chinese companies barely staying in business with a growing number slipping into insolvency and bankruptcy, plus more traditional corruption, and adverse government policies.

    An example of unique Chinese economic problems can be seen in the 2023 real estate crisis. The usual solutions did not work as well as the government expected. The largest problem was corruption at the provincial and local level. Over the last decade there has been a major effort to purge the false reporting from national economic statistics. The false data problem is not gone but at least it is recognized. This was painful because it revealed that past economic growth was more uneven and less than everyone believed. Many foreign economists had figured this out but now everyone knows about it. China now realizes it has a dangerous real-estate bubble that must be deflated carefully, or it could cause a major economic recession. China has to be more careful about verifying economic data coming from provincial officials. This is crucial because a major real estate default is a threat to the entire economy. The major real estate firms are Evergrande and Country Garden and to prevent a debt default, government owned banks and enterprises that hold much of this bad debt have been ordered to tolerate delayed overdue payments on this debt.

The article then goes on to note that Xi, by making himself a lifetime dictator, has essentially turned China into a fascist state, and its aggressiveness over Taiwan and encroachments into territories held by neighboring countries has made its neighbors nervous and resulted in them increasing their military expenditures. 

    And then there are the demographic issues. The article relates:

    ... In 2008 it was noted that China’s birth rate had fallen to 1.8 births per woman, which was beneath the replacement rate of 2.1. That means the population will begin to decline slowly in the next decade or two.

    But the biggest problem is the growth of retirees, and the shrinking number of workers to support them. Proposals to allow more births run into arguments about limited resources. Moreover, as women become more affluent, they are less inclined to have lots of kids. Japan is way ahead in this population curve, and China does not want to join them. But no one has yet come up with an acceptable alternative. The impact of fewer births in urban areas over two decades ago led to growing shortages of skilled labor. The costs of manufacturing high tech gear is growing, forcing Chinese manufacturers to move more factories to nations with cheaper labor. The military is giving the troops a raise, especially the technicians. Otherwise, it can’t recruit them, or keep them. ...  

 Read the whole thing.