Sebastian Mallaby, the senior fellow for international economics at the Council on Foreign Relations, in an article in the Washington Post on September 24, pointed out that four signs show China “is starting to crack.”
First, the difficulties and risks caused by the Chinese Communist Party (CCP) ‘s Zero-COVID policy
Second, problems and defaults in the real estate market
The third is the consequences of the suppression policy of the tech giants
And fourth, demographic problems
Regarding the first one, Mallaby commented that, in contrast to the rest of the world, China’s regime maintains a Zero-Covid policy based on lockdown.
Whenever China’s authorities detect a COVID-positive case, they immediately implement a draconian lockdown.
Major cities such as Shanghai, Shenzhen, and dozens of other Chinese cities have all suffered devastating lockdowns, disrupting global supply chains and causing food shortages and difficulties for millions of people.
As for the real estate market, Mallaby regards the CCP as discouraging private consumption and based growth on exchange rate manipulation. As a result, this policy has led to unhealthy growth in the real estate market.
According to Malaby, CCP has asked banks and local authorities to create favorable conditions for capital for real estate construction projects.
When the real estate bubble burst, real estate companies fell into default, and their construction projects stalled. Homeowners were most affected.
As the difficulties go unresolved, China’s banks and real estate companies are falling into a new recession as homebuyers call for a wave of mortgage boycotts. Now, this wave has spread to more than 100 cities.
Currently, home prices in China have fallen for the 12th consecutive month.
The real estate sector accounts for about a quarter of the economy’s income; its collapse makes the crack in China’s regime base even wider.
The third is the crackdown on tech giants.
Malaby explains that the CCP cannot support tech giants aspiring to become influential corporations for political reasons, and coupled with its obsession for total control, it has launched an offensive against tech giants.
And as a result, China is discouraging entrepreneurs from investing, and there may not be a new generation of tech corporations.
As for the signs of the demographic crisis, China’s regime had adopted a harsh policy of only one child per family for decades. This has left China’s ruling power with social and cultural consequences. Although the regime has realized its mistake and is now promoting childbirth, it has not been able to reverse the trend.
The lack of quantity and quality of labor resources, along with the problems arising from the gender imbalance, are major challenges for China’s future.