China's badly sagging internally, but that doesn't mean it doesn't pose a threat on the world stage

 Michael Schuman, a Beijing-based writer for The Atlantic, says that years of trying to mix free-market activity (private companies) with heavy-handed statism (industrial policy, regulation) has taken the wind out of China's sails:

China’s jobless college graduates have become an embarrassment to Chinese leader Xi Jinping. The unemployment rate among the country’s youth has reached an all-time high, putting the country’s severe economic troubles on display at home and abroad. In August, Xi’s administration decided to act: Its statistics bureau stopped releasing the data.

But Xi can’t hide China’s economic woes—or hide from them. The problems are not just a post-pandemic malaise, or some soon-to-be-forgotten detour in China’s march to superpower stature. The vaunted China model—the mix of liberalization and state control that generated the country’s hypersonic growth—has entered its death throes.

The news should not come as a surprise. Economists and even Chinese policy makers have warned for years that the China model was fundamentally flawed and would inevitably break down. But Xi was too consumed with shoring up his own power to undertake the necessary reforms to fix it. Now the problems run so deep, and the repairs would be so costly, that the time for a turnaround may have passed.

Contrary to the assumptions of many commentators in recent years, China may never overtake the United States as the world’s dominant economy if current trends continue. In fact, it’s already falling behind. 

Once again, we're seeing that central planning is a poor way to gauge what a country is going to need, Over-investing in housing, factory capacity, railways, etc. has resulted in a debt level three times that of the size of the country's economy.

Xi once talked a good game about moving in a sensible direction, but the initiatives he talked about never got off the ground:

Early in his tenure, Xi seemed to accept these imperatives. In 2013, he signed off on a Communist Party reform blueprint that pledged to give the market a “decisive” role in the economy. But the reforms never happened. Enacting them would have diminished the power of the state—and thus Xi’s own power. China’s leader was unwilling to trade political control for economic growth.

The more power Xi has commanded, the heavier the state’s hand in the economy has become. Xi has relied on state industrial policy to drive innovation, and he has imposed intrusive regulations on important sectors, such as technology and education. As a result, China’s private sector is in retreat. Two years ago, private companies accounted for 55 percent of the collective value of China’s 100 largest publicly traded firms, according to the Peterson Institute for International Economics; in mid-2023, that share fell to 39 percent.

People's incomes are going in the wrong direction for domestic consumption to take up the slack.

So the way to project an image of continuing power, it seems, is to act like a menace in the western Pacific:

China’s navy has launched its largest-ever manoeuvres with an aircraft carrier in the western Pacific, according to foreign defence officials and analysts, as Beijing flexes its military muscle to push back against the US and its allies.

 

The Shandong, the People’s Liberation Army Navy’s second aircraft carrier, was on course on Tuesday to converge with more than 20 other Chinese warships in waters between Taiwan, the Philippines and the US Pacific territory of Guam, said two Asian security officials.

 

“This is by far the largest number of ships we have seen training with any Chinese carrier so far,” said Su Tzu-yun, an analyst at the Institute for National Defense and Security Research, a defence-ministry backed think-tank in Taipei. “They are expressing their displeasure with the various military exercises that have been under way in their periphery.”

 

Taiwan’s defence ministry counted 20 PLA warships in the waters around the island in the 24 hours to early Tuesday morning. It did not give any detail, but the disclosure followed its announcement on Monday that the Shandong had sailed through the Bashi Channel, which separates Taiwan from the Philippines, into the Pacific. Japan’s military also reported the passage of eight PLA naval vessels into the Pacific via the Miyako Strait, south of Okinawa.

 

One east Asian national security official said the vessels spotted by Japan — six missile destroyers and two frigates — were continuing in a direction that indicated they would meet up with the Shandong. A separate Asian military official said some of the PLA vessels operating near Taiwan were also following the carrier.

When Marxist-Leninists with big egos reach this stage in their fortunes, they aren't too concerned with what international organizations and multinational corporations think. 

This situation is going to continue to get more raw and real for all of us.