It is becoming increasingly clear that China’s economy is facing significant headwinds. Most of this is Beijing’s own doing. A draconian zero-COVID-19 policy has locked down swaths of the economy, severely hit consumer spending, and curtailed factory output. Aggressive regulation of the technology sector, driven by Chinese President Xi Jinping’s retreat from private enterprise and embrace of Maoist socialism, has paralyzed a once-dynamic industry. A debt bubble in the country’s overinflated real estate sector has led to spectacular crashes, including the default of Evergrande, a gigantic property developer. Meanwhile, Russia’s invasion of Ukraine is pushing up global prices of food, energy, and other commodities imported by China. For all these reasons, the International Monetary Fund recently lowered its forecast for China’s economic growth to 4.4 percent this year—anemic by past Chinese standards. Bloomberg Economics predicts as little as 2 percent and expects the United States to grow faster than China for the first time since 1976.
Couple these recent trends with longer-term headwinds such as slowing productivity growth, demographic decline, and a continued brain drain among technology workers and entrepreneurs, and it becomes clearer that China is not the economic juggernaut many in the West believe it to be. In the context of heightened geopolitical competition, that’s led to a lot of schadenfreude, cheer, and outright triumphalism in the West. Now, “the United States can shape the collapse of China just as it did the Soviet Union,” Robert Wilkie, secretary of veterans affairs during the Trump administration, argued late last year.
