China’s economic landscape has taken a significant turn for the worse, marking a period of unprecedented turmoil for the nation. The deterioration of its economic conditions has become too overwhelming for the Chinese Communist Party (CCP) to mask with propaganda. Even the regime’s own 75th anniversary celebrations were modest, reflecting an acknowledgment of the negative trends shaping China’s economy. The roots of these issues trace back several years, exacerbated by the trade tensions initiated during the Trump administration’s tariffs in 2018 and 2019. However, it was the CCP’s harsh “zero-COVID” policy over the subsequent three years that truly deepened the economic crisis, leading the nation into a challenging situation as the year 2024 nears.
As 2024 approaches, the CCP finds itself grappling with domestic economic conditions that are testing its stability. Recent reports indicate that civil unrest has surged by 18 percent compared to the previous year, signaling a growing discontent among the populace. Central to this downturn is the real estate sector, which constitutes nearly 30 percent of the country’s GDP and shows no sign of recovery, as both home prices and sales continue to plummet. Compounding this issue, consumer spending in China remains notably low at just 38 percent of GDP, in stark contrast to developed nations where it hovers between 60 to 70 percent. The combination of a weakened real estate industry and timid consumer spending points to a troubling economic landscape that complicates China’s recovery prospects.
High unemployment rates among the youth exacerbate the crisis, with figures for those aged 16 to 24 reaching at least 21 percent prior to the CCP’s modification of reporting methods in mid-2023. By revising these statistics to exclude students, the CCP lowered the reported rate to 14.9 percent, yet this is still alarmingly high compared to the national rate of 5.1 percent. The disillusionment prevalent among young Chinese citizens leads to a growing sentiment of “lying flat” — a refusal to engage in the aggressive work culture or seek the prosperity once enjoyed by preceding generations. This pervasive sense of apathy undermines future economic growth and poses a risk of social unrest, evoking historical memories of early protests against governmental authority.
At the core of China’s economic malaise lies the intertwined realities of political and industrial policy. The CCP’s economic strategy emphasizes the benefits of low domestic consumption and a high savings rate, directing capital into state-controlled banks to fund specific industries. This fosters a system where the focus is largely on maximizing industrial output rather than innovation or differentiation, culminating in significant overproduction with poorly aligned global demand. Such oversupply irritates international trade relations, leading to tariffs and escalating tensions with other nations. Consequently, the lack of adaptability in China’s economic framework renders the CCP vulnerable to internal and external pressures that threaten its grip on power.
As China finds itself embroiled in a downward spiral of deflation, dwindling consumer confidence, and increasing disillusionment with the CCP, the government faces limited options. The Party can withstand a decline in public confidence through stringent surveillance and control, but an erosion of its power poses an existential threat. As a response, the CCP is likely to continue its support of vital sectors, such as artificial intelligence and military advancements, while neglecting less critical industries. Despite occasional boons in certain sectors, the overarching narrative is one of sustained economic decline, prompting capital flight and investment exodus from China.
In conjunction with these internal challenges, China has adopted a confrontational stance globally through its wolf warrior diplomacy. Spurred by rising criticism of its handling of the COVID-19 crisis and pressures from the ongoing trade war with the United States, this policy leverages aggressive international posturing to divert attention from domestic struggles. The CCP appears to utilize nationalism and an anti-Western narrative to rally support amid economic challenges. Recent provocations, such as military maneuvers near contested territories with the United States and its neighbors, suggest that despite predictions of a waning wolf warrior approach, China continues to assert itself aggressively on the global stage. The symbiotic relationship between shaken domestic confidence and international assertiveness indicates a complex landscape for China as it navigates economic and political crises.
