President Xi’s ‘Chinese Dream’ has faded and died

President Xi Jinping’s “Chinese Dream” is looking frayed around the edges as it fades from the country’s psyche. In 2012, he rolled out his vision of the future during a visit to the Road to Rejuvenation exhibition at Beijing’s National Museum of China.

It was anchored on breakneck economic growth, fueled by a construction and manufacturing boom, coupled with a massive funding injection into new technologies.

Slightly more than a decade later, his economic policy is creaking under debt, while the world is engulfed in trade tensions and tariff wars. Today’s latest data from the National Bureau of Statistics revealed that China is in serious trouble.

“There is no question that China’s rise is at least stalling. The working-age and total population are now in relentless decline,” George Magnus, the renowned economist and academic at Oxford University, pointed out.

“The urbanization rate, just over 60%, is flattening out. Productivity growth has stalled,” the author of Red Flags: Why Xi’s China is in Jeopardy wrote in a commentary for The Guardian last month when he warned, “Why Peak China may finally have arrived.”

China [is struggling] to break its addiction to manufacturing.

Financial Times

By the numbers: 

• Retail sales rose by 3.4% in August from a year earlier, while industrial output growth slowed to 5.2%, the worst performance in 12 months. 
• Fixed-asset investment, which is reported on a year-to-date basis, expanded just 0.5%, a sharp slowdown from the 1.6% expansion in the January-to-July period.

Delve deeper: Deflation has also become a colossal problem as stagnant wages squeeze domestic spending after the property meltdown in 2020. The broader economy has also been infected by overinvestment, overcapacity and overproduction.

Between the lines: “China [is struggling] to break its addiction to manufacturing. Local governments are steering investment into new factories, adding to overcapacity and eroding profit margins [even further],” the Financial Times reported recently.

Big picture: Alicia García Herrero, at the Brussels-based think tank Bruegel, highlighted the dangers of the country’s mercantile economic model in a report released in June.

Bottom line: “Despite the rest of the world importing from it, China’s industrial capacity is simply too much to absorb,” she said.

China Factor comment: Last year, Xi’s US$18 trillion economy fell further behind the United States. It was just 62% of the nearly $30 trillion GDP number. “In GDP per head terms, China is still no more than 20% of the US,” Oxford University’s Magnus said.