China’s economy continues to struggle, with the Chinese Communist Party (CCP) remaining silent despite the challenges. The CCP has even gone as far as restricting people from speaking negatively about the economy. However, US President Biden recently openly criticized China’s economy, stating that it is “on the edge of collapse” and highlighting two key aspects of the truth about China’s economy. Experts suggest that the US may be preparing various contingency plans in response to the possibility of China’s economic collapse.
China’s overall economic development has been on a downward trend, still struggling to recover after facing significant impacts from over three years of pandemic restrictions. The real estate market is sluggish, the stock market is plummeting, numerous companies are closing down in batches, unemployment rates are soaring, and export demand is weak.
However, starting in December last year, the CCP has been promoting self-praise about the economy “fully recovering” while cracking down on any form of “singing the economy’s decline,” using the national security apparatus to silence any dissenting voices. While the CCP continues to silence its own people, it cannot silence the US President.
In an interview published by Time magazine on June 4th, Biden publicly stated: “Everybody talks about how strong China is, how they have grown, but most of China’s population is much older than the vast majority of young people in Europe. They are already too old to work, and they are also exclusionary. Where does the labor force come from? How does the economy develop? China’s economy is on the verge of collapse. But some say their economy is booming? Stop it.”
As the leader of the world’s largest economy, President Biden’s remarks on “singing the decline of China’s economy” have been widely reported by international mainstream media.
Sun Guoxiang, Associate Professor of International Affairs and Business at Nanhua University in Taiwan, told The Epoch Times that President Biden’s conclusions are likely grounded in solid information sources, potentially having a well-rounded intelligence gathering structure.
President Biden’s comments reflect a pessimistic forecast on China’s economy shared by the international community. Sun believes that President Biden’s remarks may also carry certain strategic intentions.
He noted, “China’s market is indeed too large, and the situation may be even more complex. As we have seen, whether on the brink of collapse or assuming it is on the brink of collapse, the US appears to be preparing various contingency plans in response to a potential collapse of China’s economy.”
President Biden openly criticizing China’s economy primarily focused on two key aspects – China’s aging population and the severe impact of the CCP’s exclusionary policies.
Sun stated, “China’s aging population is indeed a serious economic challenge.”
“With the aging of China’s population under the CCP, the decrease in the labor force number and the increase in the social security burden will have unfavorable effects on China’s economic growth.”
China’s population experienced negative growth in 2022 and 2023. According to the latest population statistics released by the CCP in January this year, China’s total population decreased by 2.08 million in 2023, with a birth rate of 6.39 per thousand people, hitting a historic low.
Based on CCP’s National Bureau of Statistics data from January this year, by the end of 2023, China’s population aged 60 and above had reached 290 million, accounting for approximately 21.1% of the total population. The National Health Commission of China projects that by 2035, this figure will increase to over 400 million, constituting 30% of the total population. Around 300 million Chinese people currently between the ages of 50 and 60 are expected to exit the labor force in the next decade.
China’s aging population does not only affect the labor force. American economist Huang Dawei mentioned that China’s aging situation is different from Japan, South Korea, and Europe, where they become old before becoming wealthy. Life is challenging for the lower rungs of Chinese society, which is a long-term negative factor for the entire industry, domestic demand, or economic activities.
President Biden also highlighted another issue regarding China’s economy – the CCP’s exclusionary policies.
Huang David noted that President Biden’s remarks are objectively driven by recent years of CCP exclusion, leading to many foreign investments or foreigners being marginalized in China.
According to a report from the EU Chamber of Commerce in China titled “Risk Awareness: Political Implications of Economic Security,” as politics gradually infiltrates the business environment, European companies in China face increased risks in terms of severity, complexity, and seriousness, especially with vague definitions of national secrets in laws such as the “Anti-Spy Law” and “Foreign Relations Law.”
In July 2023, the CCP implemented new revisions to the “Anti-Spy Law,” expanding the definition of “spy activities” and retroactively applying the law. Meanwhile, China’s Ministry of State Security issued a public mobilization order urging the public to report spies.
In 2023, there were multiple incidents involving raids on foreign companies and detention of employees in China, involving companies such as Smartwise Group, Bain & Company, Kaisun Rongying, and the investigation of US investment bank Morgan Stanley.
As the business environment deteriorates, foreign interest in China wanes. Data released by the CCP on February 18 showed that foreign direct investment in China hit its lowest level since 1993 in 2023, plummeting by 82% compared to 2022.
Sun Guoxiang suggested that the CCP’s exclusionary policy “will not only have a particularly adverse effect on China’s development of high-tech industries and other areas that require international talent support. This will also impact China’s future innovation capability.”
Sun noted that President Biden’s summary of economic issues this time only covered two aspects – aging population problems and the CCP’s exclusion policy. To determine whether China’s economy is on the brink of collapse, multiple economic indicators and factors need consideration, including GDP growth rate, Manufacturing Purchasing Managers’ Index (PMI), the real estate market, debt levels, among others.
The CCP reported a 5.3% GDP growth rate in the first quarter of this year, but in May, the official Manufacturing PMI dropped from 50.4 in April to 49.5, falling below the threshold of 50.
Huang Dawei pointed out that the first-quarter GDP is closely related to China’s significant exports earlier this year, as well as the increase in electric vehicles and solar panels exported to Europe and America. Many orders are concerned about potential increased tariffs in the second half of the year, prompting a rush in shipments during the first and second quarters, hence, a noticeable increase in exports.
“So, it is hard to sustain this (GDP growth rate) in the second and third quarters, as we have seen that manufacturing orders in May dropped below the threshold of 50.”
Sun Guoxiang also stated that PMI is a crucial indicator. “The PMI in May dropped below the threshold of 50, showing that manufacturing is contracting, reflecting weak demand, overcapacity, and other issues.”
Another indicator is the real estate market. Sun explained, “The real estate market has a significant impact on China’s economy; high property prices and large unsold properties could lead to a burst of the housing bubble, affecting not only the real estate sector but also financial stability and economic growth in China.” He added that the current unfavorable regulatory policies of the CCP may pose greater economic risks.
He pointed out that China’s debt levels are relatively high. “High debt levels may limit the government and enterprises’ investment capacities while also potentially increasing financial crises.”
“The current consumer confidence index and retail sales in China are weak, which could also contribute to the current economic collapse issues.”
Huang Dawei emphasized, “Indeed, as President Biden mentioned, China’s current economic difficulties are tremendously significant, far surpassing the economic crises of 2015 and 2016 in China, as well as the financial disasters of 2008, and the biggest issue is that all the previous market rescue measures are ineffective.”