It is now approaching one in five (18.9%) in the 16-24 age group, with millions of young graduates being left out of the market. Unviable or bankrupt businesses that survive largely due to government financial support. And a gap – in incomes and investment opportunities – between the countryside and the big cities that keeps growing. The data could concern one of Asia’s smaller economies, with their well-known problems. And yet, they sketch the image of the giant named .
At first glance it seems strange – if not outrageous – that the world’s second largest economy, with a GDP of $19.4 trillion, a per capita income of $13,000 and an (estimated) next-year growth rate of 4.8%, would be described as troubled.
After all, not even two months have passed since Beijing’s ambitions were embodied in the meeting of Chinese President Xi Jinping with his American counterpart, Donald Trump, where the latter came to the meeting table after a trade war that he seemed to be losing. China retaliated against US tariff blackmail by capitalizing on its pivotal role in global industrial production, and even appeared to be presiding over the transition to a multipolar world.
Two opposing tendencies
And yet, the Wall Street Journal, in a report by its correspondent in Beijing, makes extensive reference to what it calls the “Chinese paradox” and which consists of the coexistence of two opposing trends within China and its economy.
The first concerns the primacy in the production of goods (China holds the primacy in exports) and the increased investment activity in new technologies, where the jump in spending on research and development between 2020 and 2024 reaches 50%, signaling the belief of the political leadership in the need for modernization.
Initiatives such as the construction of a record number of industrial robots, the creation of a new aircraft carrier and the declared goal of a manned space mission in 2030, confirm the strong ambitions of the Asian “dragon”.
The second trend touches on the big, persistent problems plaguing the rising superpower. One of them is the constant decrease in real estate prices (17% compared to
levels before the Covid-19 pandemic), which always leaves open the scenario of a new housing “bubble” bursting capable of causing unpredictable developments, similar to the collapse of the real estate company Evergrande in 2021. Another problem concerns the backwardness of the Chinese mainland, an indisputable presumption of development asymmetry. The case of Mianchi Province, to which the article refers, is indicative since the 10% decrease in revenue was accompanied by the projected 50% increase in research and development expenditures. As a result, there is a delay in the payments of local officials.
This is an offshoot of the central planning policy that characterizes China and the ruling Communist Party, as targets are applied universally but at different speeds in provinces and counties, resulting in debts that are secondarily covered by state resources.
“The waste of resources runs through the country’s economy at many levels,” comments Lauren Brandt, professor of economics at the University of Toronto. A study by the University of Wuhan in 2024 came to the same conclusion, where, among other things, the disparity between the countryside and large urban centers (in China there are 18 metropolises with a population of more than ten million) is characterized as a “significant challenge”.
Client capitalism
It is not the first time that China’s growth has been raised as a puzzle to be solved, with some analysts linking its growing aggression to the regime’s existential anxieties. As early as 2018, Tufts University Political Science Professor Michael Beckley took a position with his book “Unrivaled: Why America Will Remain the World’s Sole Superpower”, estimating that Beijing has entered a decaying trajectory. In this opinion – which followed a series of articles in Foreign Affairs – Beckley based his claim on a number of factors.
The main one concerned China’s lagging behind in all indicators of entrepreneurship, with the difficult legal framework and the special weight of the political connections of the business world with the Communist Party making China a par excellence case of crony capitalism, inflexible to new ideas, capable of fueling primary innovations.
He did not hesitate to defend his point of view a few days ago, in the context of his speech from the World Knowledge Forum platform, speaking of the end of the “Chinese hangover” and emphasizing the cocktail of demographic aging (the population will decrease by 1.39 million in 2024), the entry of hundreds of millions of pensioners into the system and the still intense problem of brain-drain, especially for the most affluent citizens who emigrate by the thousands in more tax-friendly destinations.
The leadership of the Communist Party, however, does not bend and seems willing to continue with the same methodical pace. “Scientific and technological self-sufficiency is the foundation of the nation’s prosperity,” Guo Yuwen, party secretary of the Guangdong Academy of Social Sciences, said in the Wall Street Journal. And he meaningfully adds: “And for her safety.”
