Given the international enthusiasm the PRC often generated in the past and from which it has profited, chiefly because of its impressive economic growth rates, it is notable how more recent 2022 assessments of China have significantly soured.
This should not be so surprising given the enormous and growing challenges the PRC faces:
- a declining and aging population;
- continuing social, ethnic, and regional inequality among the Chinese people;
- a terribly polluted environment – including the air, water, and land;
- its daunting dependence on imports of food, energy, and raw materials;
- a slowing economy with a huge debt burden built on government loans for often unnecessary infrastructure and unsellable empty housing, office buildings, and malls;
- decreasing foreign interest in investing in state-subsidized Chinese companies that steal intellectual property;
- Xi Jinping’s commitment to a widely unpopular, oppressive, and commercially unfriendly zero-tolerance COVID-19 policy that has failed;
- an increasingly authoritarian government that stifles innovation and entrepreneurship;
- widespread global dissatisfaction with PRC policies toward Xinjiang, Hong Kong, the South China Sea, Taiwan, and the Russian invasion of Ukraine, among other concerns, and the resulting increase in unfavorable views of China and Xi Jinping.
While all these problems are receiving increasing attention both in scholarly journals and popular media, we can focus here on three issues that may be the most serious for the future of the PRC: a decline in economic growth, demographic failure, and growing international distrust and opprobrium.
Diminishing Economic Growth Rate
In June 2022, the World Bank issued a dire forecast: “We project real GDP growth to slow sharply to 4.3% in 2022 – 0.8% lower than projected in the December China Economic Update.” In late May two investment banks had already cut their China GDP forecasts even further based on the continuing cost of government-imposed COVID controls.
JP Morgan reduced its projected growth rate from 4.3% to 3.7%, while UBS cut its forecast even further to 3%, down from 4.2%. Meanwhile, the official PRC target for 2022 remains 5.5% growth.
As the World Bank explained, however, it is not merely a matter of slowing GDP growth but its source: “there is a danger that China remains tied to the old playbook of boosting growth through debt-financed infrastructure and real estate investment. Such a growth model is ultimately unsustainable and the indebtedness of many corporates and local governments is already too high.”
As Michael Pettis argued in late April in a Carnegie Endowment essay titled, “The Only Five Paths China’s Economy Can Follow,” the PRC can continue to ignore “hard budget constraints” by allowing more investments by local governments, state-owned enterprises, and property developers, but thereby “letting large amounts of nonproductive investment continue driving the country’s debt burden up indefinitely.”
Alternatively, it has to replace such non-productive investments by:
- initiating productive investments like new technology;
- increasing consumption;
- achieving a growing trade surplus;
- or, doing nothing, in which case growth would necessarily slow even more sharply.
A Diminishing Population
Needless to say, these alternatives are either difficult to achieve or unpalatable. Underlying the PRC’s limited policy choices is the more fundamental challenge the PRC faces in an ongoing demographic disaster that makes China’s economic prospects even bleaker. As Peter Zeihan argues in The End of the World is Just the Beginning: Mapping the Collapse of Globalization(2022):
“China in 2022 is the fastest aging society in human history. In China, the population growth story is over and has been over since China’s birth rate slipped below replacement levels in the 1990s. A full birth replacement rate is 2.1 children per woman. As of early 2022, China’s only partly released 2010-2020 census indicates China’s rate is at most 1.3, among the lowest of any people in human history."
"The country’s demographic contraction is occurring just as quickly as its [earlier] expansion, with complete demographic collapse certain to occur within a single generation. China is amazing but not for the reasons most opine. The country will soon have travelled from preindustrial levels of wealth to postindustrial demographic collapse in a single human lifetime.”
The failure of the PRC’s much-touted and strictly enforced one-child policy has finally come home to roost. It was already evident to a State Department demographer with whom I spoke before my first tour in China in 1987-90. She pointed out that the future results of a one-child policy were mathematically certain and therefore absolutely predictable.
I thought of her predictions during a subsequent tour at Embassy Beijing when the Foreign Ministry invited me along with other foreign diplomats on a Yangtse River cruise which ended near the site where the Three Gorges Dam was being built. The whole point of the cruise and the village stops along the way was -- in the face of international criticism of the PRC’s one-child policy and the often brutal measures to enforce it -- to extol the virtues of the policy and how it would positively transform a poor and overpopulated China.
What was entirely overlooked of course is what my demographer had pointed out: you need a sufficient number of children born to ensure you have future workers who are also consumers, entrepreneurs, and innovators, thereby bolstering the economy and ensuring its future health, and also providing support for the elderly. One child per family cannot achieve the population replacement rate of 2.1.
Moreover, by limiting families to one child, a majority of Chinese families preferred a boy, according to a BBC report: “Limited to having only one child since 1980, a majority of couples opted for a son, lifting the sex at birth ratio from 106 boys for every 100 girls (the ratio in most of the rest of the world) to 120, and in some provinces to 130.” This of course also created other social problems when young men searched for wives.
Increasingly Unfavorable Views of the PRC
Meanwhile, the international environment in which China must operate is increasingly hostile to the PRC and many of its policies. According to the latest Pew Research Center survey released on June 29, 2022, it is evident that few developed countries, especially Western democracies, have positive views of China, and just as few are fans of the PRC’s paramount leader Xi Jinping. “The data from more than 20,000 respondents in 19 advanced economies revealed highly critical views of China on a range of issues, but also a shared view that China’s influence is growing.”
This latest iteration of the Pew survey on attitudes toward China (the first such Pew poll was conducted in 2002) found that perceptions of China are at historically negative levels. Critical views of China spiked in 2020, after the outbreak of the COVID pandemic, but have remained at similar levels since. Of the 19 countries surveyed, the average view was 68% unfavorable toward China.
Japan held the most negative views at 97%, but Australia registered (96%). Sweden (93%) was close behind, and the U.S. (82%) followed in fourth place. Most European countries and South Korea were also found to have negative views. Only Israel (46%), Malaysia (39%), and Singapore (34%) did not reach 50% or more unfavorable views. Greece was evenly divided at 50%.
Lack of Confidence in Xi Jinping
Consistent with the largely unfavorable PRC ratings, it is not surprising that of the 19 countries surveyed, a majority of respondents in most countries had little or no confidence in Xi Jinping. More than 80% of Americans, Swedes, Japanese, Australians and South Koreans held such negative views, and more than 60% of most other countries’ citizens who were polled similarly lacked confidence in Xi. The biggest exceptions were again Malaysia and Singapore, which economically depend in large measure on China.
China’s Human Rights Policies
Interestingly, China’s human rights policies were the key concern of 80% of all respondents across 19 countries. China’s military power followed closely in second place.
PRC economic competition and PRC political involvement in other countries’ affairs took third and fourth place, respectively. But all four issues scored as matters of concern to some 60% or more of all those polled across 19 countries.
Problems Not Easy to Solve
The economic growth problem will be difficult to overcome because the policy shifts required will take time and will be politically difficult to adopt given that so many vested interests would be threatened by the necessary changes.
Economic decline is also closely linked to a systemic demographic decline that will be difficult to turn around. It is easier to order an increasingly urbanized population of families to have only one child than to persuade, much less command, them to have three.
Finally, the Pew Survey results suggest that in addition to its economic and demographic challenges, China has a seriously negative image problem across many of the most important countries in the world with which it must trade, negotiate, seek investments, and interact both bilaterally and multilaterally.
This is a particularly difficult challenge to overcome because it stems from the hegemonic and authoritarian nature of the PRC government, which threatens other countries, and neither Xi Jinping nor the Communist Party of China is interested in reform.
Nonetheless, for democracies around the world, one potential downside of a PRC in decline is that a frustrated and diminished dragon may decide its best alternative is to lash out at those deemed hostile to its grandiose ambitions. This could mean trouble for democracies in Asia and beyond.