The prospect for China

 Video: Why China will NOT be the next Japan (Rise of Asia):

Video argues that China is NOT facing the "lost decades" of Japan in the 1990s

Chapters: 

0:00 China Will Not Become Like Japan 

1:15 Modern-Day China is Not 1990 Japan 

2:50 Aging Population: A Ticking Timebomb? 

5:49 The Truth Behind the Fall of Japan 

10:07 Conclusion

[Addendum 11/6/20025: China's coming collapse.] 

Video: China is facing 8 Crises (China Truths):

1) Real Estate/Property and related 

2) Consumer Spending fell. 

3) Loss of Manufacturing jobs 

4) Falling FDI 

5) Unemployment, and increasing youth unemployment, especially graduates. 

6) Ageing population 

7) Large civil service and large payroll burden (40% of tax revenue). 

8) Maintenance costs

There are a lot of videos on the impending fall of China. These are usually published by anti-China forces (often under different names). The two videos are examples of opposing factions. "Rise of Asia" is a pro-China channel, while "China Truths" is part of the "anti-China" faction. 

So which should you believe?

Is China's rise inevitable, and China's eventual position as the top superpower or at least top economic power simply a matter of time?

The two factions will differ in their selective interpretation of the facts. Or at least one faction will.

This is my attempt to present this objectively and factually.

But I should say, I'm inclined towards the theory that China has passed its peak.

Why?

Everything you need to know about China's Ruthless Economy

1 China's Growth

China has targeted an annual growth rate of 7% in order to provide her citizens with a steadily improving standard of living. In fact in the initial years, the GDP growth was over 10%. At least up to 2010.

However, since then, China's growth has slowed.

Moreover, China's economy is badly unbalanced. And there are evidence that much of the growth was fictional - based on lies, exaggeration, and "misreporting" by provincial government... for political reasons.

Also, China's growth is overly dependent on "investments" - in high speed rail, housing and property development are glaring examples. Housing is particularly egregious. One estimate is that the housing overbuild may be 100% to 200%. And the housing bubble has "burst", and now no one wants to buy homes which are over-valued, and likely to lose their value in the near future.

Over investment in extravagant infrastructure such as High Speed Rail lines and stations, and airports have also resulted in provincial governments being heavily indebted.

Ray Dalio has "historically been bullish on China". However, he is now "concerned" about the Chinese economy, noting that there are real issues and the (economic?) environment is changing and becoming more difficult.

Workers in Finance, Real Estate, and Consumer tech are all seeing their wages and income cut and job prospects evaporate. 

And with that, goes their confidence in the economy, and consumer spending.

Xi Jinping does not believe in stimulus for the economy, and that has left the Chinese Economy in the doldrums for over a year. Finally, in Sept 2024, China finally gave in and provided some fiscal stimulus. But is it too late?

By this time the Chinese Economy has become "extreme" to the point of being out of control. And Xi has secured his position by systematically eliminating any and all possible challenges to his authority by removing all possible opposition to him, and establishing a leadership based on a cult of personality.

Unfortunately, his ideological position is socialistic/communistic and he has NO economic intelligence that would be necessary or relevant to run modern China. 

And China needs someone with economic wisdom to lead China out of the economic mess created by 20 years of excess and short-sighted exploitation.

Xi is not that economic genius.

Visual Capitalist's chart above shows that China's growth is lagging even behind Japan and many other Asian Economies.

2 Provincial Government's Debt/Cashflow Crisis

Because of the financial structure of China, the provincial governments have to raise revenue on their own. One way they do this is through LGFV - Local Government Financing Vehicles. 

This allows the Provincial Governments to raise funds to carry out government functions. One way to raise funds is to sell (or lease) land to developers for them to build housing, which is then sold for profit. Except that since the property crash, sales of homes and consequently land has fallen, and Provincial Govts and their LGFV have not been able to raise enough funds for government functions. Developers have needed the funds nor the desire to buy land for development of new projects.

Apparently, some (or many) provincial govt have taken to kidnapping people for ransom to supplement their governmental revenue.

Video: Why China is running out of time to invade Taiwan (Decoding Geopolitics Podcast)

3 China's Demographics

China has been lying about their figures. But even if it hadn't, the one-child policy has created a demographic problem.

For the first 40 years or so, China enjoyed a demographic dividend as young people from the rural areas flocked to the cities to find jobs in factories. And China's economy boomed as a result of this demographic dividend. 

However after 40 years, those young workers from the countryside are no longer young, and are now facing retirement. And because of China's low births, the number of young people to replace the retiring workers are fewer.

Also, these young people are now more educated, graduates even, and they want a better job than just toiling in factories.

But such jobs are scarce. 

Video: Why China may never surpass the US (Behind Asia)

The three main reasons are, 1) US-China Trade war which actively curtails China's rise/growth, 2) Demographic changes in China - decreasing population, and ageing population. 3) Economic structure of China - Investment/export led economy rather than a consumption-based economy. 

4 Geopolitics

Video: Kishore Mahbubani REVEALS China's Strategy to Counter the US

Mahbubani shared that the reason the Soviet Union collapsed was because of internal weaknesses. The US prevailed because of greater "vibrancy" or resilience. And so China's takeaway is to make sure the Chinese economy is strong as well as the Chinese society.

The second strategy the US executed was that the US had a containment strategy with NATO in the West, and Japan, and South Korea in the East to bracket and contain the Soviet Union.

China being wary of such a containment strategy made pre-emptive moves against such a strategy by ensuring her neighbours (potential containment partners for the US) were economically intertwined with China, and has cordial if not friendly relations with China. 

Mahbubani has a biased perception of China's role globally, and reflects China's PR (or propaganda) narrative.

[Note: Mahbubani is Singaporean, and if you understand that as a loyal Singaporean, his words and intent ultimately (or ulteriorly) is intended to support or push Singapore's agenda. It is in Singapore's best interest that China and the US DO NOT engage in a great power conflict (i.e. war) because as a trading nation, war is bad for business. So it is in his (Singapore's) interest to "agree" with China that their strategy is working, and that they are concerned only with China's peaceful rise, regardless of the actual facts on the ground.]

Yes, China wants to have her neighbours on her side so the US cannot co-opt them into an anti-China bloc. BUT, China wants one thing, but acts counter to that objective. China's belligerence is manifest in her South China Sea "policies" and actions. 

China is even accused of collaborating with the Houthis!

Peaking Power Trap

(Or Peking Power Trap?)

Video: (Rise of Asia) "Lee Kuan Yew's Godly Predictions About China's Rise"

I am reasonably sure that "Rise of Asia" is a pro-China channel. This was the comment I left on the video:

LKY died in 2015. So this video would of course be before that. At 3:00 Lee says that is has been 33 years since 1976. So this would place this video around 2009. So anything Lee says is based on the facts he has in and around 2009. 

So in 2009, China is still only the 3rd largest economy after the US and I believe, Japan. But within a year (or years) China would overtake Japan and become number 2.

BUT... Since 2009 the following events have taken place. 

- In 2012 (2013?), Xi Jinping became the leader of China. 10 years later (2023), Xi started his 3rd term after doing away with Term Limits that had been set up by Deng Xiaoping (If I am not wrong, to prevent another Mao). 

- Mar, 2015 LKY passes away.

- In 2016, in the US, Trump is elected President, and he starts a trade war with China (cos, Trump). 

- 2020, Xi burst the Real Estate Bubble, introduced the "Three Red Lines" - Developers start to flounder (Evergrande, Vanke, etc), Jack Ma critique of the Financial Regulations just days before Ant Group's IPO led to his "disappearance", and the scuttling of Ant's IPO costing Ma/Ant billions. 

- 2021 Crackdown and closure of the Private Tuition sector, and promoting "common prosperity" (a.k.a. shared poverty). As a result of bursting the property bubble, closing the private tutoring industry, trade wars, and cracking down on tech entrepreneurs (like Jack Ma), and celebrities, there were fewer jobs for Youth. In 2023, Youth Unemployment hit a high of over 21%, and reporting of these figures were suspended until a new "formula" was worked out (the new formula included self-employed jobs like "Influencers" and "social media content creators" as "employed".)

- Xi also replaced his advisors with loyalists over time just before his 3rd term as supreme leader in 2023. Most if not all are non-economists, but are "Yes-men".

- In 2023, India overtakes China as most populous nation. China's population drops to 1.425 billion. 

- In 2024 Trump elected a second term, and in 2025, he unleashed a slew of tariffs. Which China has reciprocated with tariffs of its own. Trade war intensifies.

These are the reasons why China's rise is now in doubt:

China's growth has slowed. One reason is demographic - China's ageing population, low birth rate, and falling population. For 40 years (1980 to 2020), the rural population moved to the cities to work in factories and GDP exploded. However, after 40 years, those young peasants from the countryside are now old. Meanwhile, China had the one-child policy, and birthrates fell. And the result of that is, population has also fallen in total numbers. And India has overtaken China. So those old peasants retiring? There are fewer young people to replace them. 

China's Growth has been fraudulent. A huge component of China's GDP growth was the contribution from investment in infrastructure - building roads, bridges, high speed rail, and homes. A few high-speed rail are profitable. Many are not. Some would even say, most are not. Homes in first tier cities are in demand... but many homes in lower tier cities were bought for "investment" and are not occupied. Provincial govt who borrowed money to invest in dubious infrastructure projects are now saddled with huge debts and no way to service them. 

Trade wars are bad for growth.

Many Western businesses have "reshored" and pulled out of China (another reason for high Youth Unemployment), and reduced Foreign Direct Investment in China. 

Covid-19. And the extended precautions/Zero-Covid policies. Xi and his economic-illiterate Yes-men. 

Deng Xiaoping had advised, "Hide your Strengths. Bide your time." And in 2009 when this interview/video was recorded, (at 15:37) Lee says that he has no doubts that the current generation wants a "peaceful rise" (and will hide their strengths and bide their time), but when the future generation think that they have arrived and they want to flex their muscles, and there will be a different China. That different China is Xi's China! In his time, there was "wolf warrior diplomacy", and then grey zone tactics against Taiwan, the Philippines, and Vietnam.

China entered the aircraft carrier era around the same time as Xi's ascend to supreme leadership of China.

At 16:19 Lee warns against the rise of a vengeful China, wishing to "square accounts" for the Century of Humiliation and other slights. It does not appear that Xi is that magnanimous leader of China.

I have looked at developments in China over the last 5 years (since the pandemic) and have concluded that Xi has not been good for China (hence this post, which has been 5 years in the drafting). Then recently, I saw videos suggesting that Xi has been displaced and removed from power.

That was not the only video. Lei's Real Talk also suggested that Xi had been removed, China Decoded also repeated this speculation. 

The CCP would have looked at Xi's ambition and flawed policies that have been disastrous for China, not accounting for Trump's devastating policies for global trade.

Xi's plan to reunite Taiwan by 2027 and commitments to such an endeavour regardless of other priorities would be an indictment against the continued leadership of Xi.

Xi's aggressive purges may also have lost him political support, and isolated him.

So as of the end of May 2025, we may (if Lei and other partisan analysts are right) be seeing the end of Xi's presidency.

[Afternote: In early June, Xi had a long (90 minutes) call with Trump, which puts paid to the rumour that Xi has been sidelined. So, we wait...]