China’s economy is rapidly approaching the point of no return.
Commentary
China’s economy is on the edge of disaster. Macro forces are deconstructing its economic development faster than most realize or even understand.
What’s more, China’s economic fall can no longer be hidden by official statistics or claims by Chinese Communist Party (CCP) leader Xi Jinping, or fixed overnight by a decree from the sole leader of China.
The economic picture is far from promising.
Questionable GDP
For example, China’s GDP growth rates, which have been celebrated by the CCP and economists around the world as proof of the viability of the state-capitalism model, have been false for at least a decade. Even in recent years, when Europe and the United States have struggled to achieve a 2 percent growth rate, Beijing routinely reports GDP growth in the 5 percent range, as late as the first quarter of 2025.
How Is That Possible?
Consider that China’s real estate industry, which was up to 30 percent of its economy, continues to collapse. Home prices have continued to fall for more than 22 months in a row.
Europe, China’s second-largest trading partner, has flatlined. Trade with the United States, China’s largest export market, has declined since 2018, when it was 21.6 percent of total U.S. imports, down to 13.4 percent in 2024. Going forward, tariffs are likely to accelerate that decline.
In an export-led economy, if your top two trading partners are negative or neutral, where is the growth coming from?
That’s what researchers at the University of Chicago are wondering. They speculate that China’s actual GDP could be as much as 60 percent less than the official reports.
Statics, the Graft Economy, and Macro Forces
The truth is that growth rate and other official statistics coming out of China are simply not credible. From unemployment and wages to population, Beijing’s official façade of a thriving China that it successfully told the world for decades, is not only slipping, it’s in shreds. Clearly, in an economic system based on political allegiance and payoffs instead of market forces, fudging the numbers comes with the territory and is critical to political legitimacy for the CCP.
But beyond graft, theft, and fake statistics, China faces four key macro forces that are driving its economy into the ground: deflation, devaluation, depressed demand, and depopulation. None exists solely by themselves, but rather, overlap with each other, often compounding the impact of each.
By James Gorrie
