Xiconomics fails to solve China’s domestic crisis
The factors that sustained the nation’s high growth cannot be repeated in the next decade
Fiction tends to blur the facts when assessing China’s economy.
Dodgy data, an opaque method of reporting unemployment numbers, and spiraling local government debt are the hallmarks of Xiconomics.
Under “Chairman of Everything” Xi Jinping, the world’s second-largest economy is mired in stagnation and a population crisis. In short, China will grow “old” before it grows “rich.”
As it does, Beijing’s global influence will wane as it tries to prop up an economy that is crying out for root-and-branch reforms. Yet caught in the firing line are the Lost Generation of college graduates struggling to find a job.
“Young people in China are fed up with their employment prospects, so they’re becoming ‘full-time children,’ ‘lying flat,’ and sprawling on the ground like a zombie,” Business Insider reported at the weekend.
Against this backdrop, the National Bureau of Statistics revealed on Tuesday that factory activity took another hit in October after falling into negative territory.
Bubble trouble:
- Local government debt is hovering around US$13 trillion or 76% of economic output.
- Property giants Evergrande and Country Life are teetering on the brink of bankruptcy, owing a combined $500 billion in bad loans.
- Up to 90% of household wealth in China is tied up in property.
- As for unemployment among the young, it might be as high as 46% after officially hitting a record 21.3% in June before Beijing suspended publishing the figures.
The labor force is rapidly declining … a matter of significant concern.
Huihua Nie of the Renmin University of china
Delve deeper: “The slowdown in China’s economy is structural, dating from the end of China’s unprecedented credit and investment expansion,” Logan Wright, of the Rhodium Group, an independent research firm based in New York, said.
Between the lines: “The factors that sustained China’s high growth cannot be repeated in the next decade, in terms of property construction and local government investment,” Wright told the Center for Strategic and International Studies.
Big picture: A rapidly aging workforce is also threatening to create a “perfect storm” as it barrels into China’s economy. This comes at a time despite chronic unemployment among the next generation of workers.
What they said: “The labor force is rapidly declining … a matter of significant concern. I firmly believe that the population issue is China’s most critical ‘Gray Rhino’,” Huihua Nie, of the Renmin University of China in Beijing, told The Paper.
China Factor comment: In economic terms, a “Gray Rhino” is a metaphor for a rogue creature that tends to charge at any moment, wreaking financial havoc. Xiconomics appears to be facing a rampaging ‘crash’ of them.