The Rise and Fall of Communist China: Part 2

Commentary

The Chinese regime has been on the rise ever since former President Richard Nixon’s “opening” of China in 1972. Some of the accomplishments of the Chinese—as heavily subsidized by foreign investment over the years—were discussed in part I of this two-part series.

The complete reversal of Xi Jinping’s zero-COVID policy has exposed both the unscientific incompetence and also the geopolitical vulnerability of the Chinese Communist Party (CCP). The CCP’s relentless propaganda about its “rightful claim” to domestic and world leadership is increasingly being undermined as Chinese and foreigners alike are experiencing and observing the explosion of COVID-19 infections and deaths in China since the zero-COVID policy was dropped like a hot rock in December last year.

But there are other headwinds of their own making being faced by the CCP as they try to jump-start its sagging economy in 2023 and tamp down foreign concerns about Chinese belligerence in Taiwan, the Indo-Chinese border, and elsewhere.

There is increasing speculation that the “rise of China” may have peaked, with a long and slow decline being unavoidable due to intractable problems (not the least of which include “communist mismanagement” and systemic corruption).

Is China rising, cresting, or falling? This part of the series examines the possibility, if not the strong probability, that China is already in decline. The fall of communist China is speculative, of course. Let us try to read some of the tea leaves to discern what may be happening toward that end.

Background

As part I discussed, communist China is hell-bent on displacing the United States as the world’s economic and military superpower. A parallel goal is promoting Xi as a world leader while pushing to replace American-style democracy with a new “Chinese world order” in a multipolar world with multilateral solutions for the world’s problems. This includes Chinese efforts to control international trade, leverage China’s export economy and supply chain dominance, exploit debt trap diplomacy as a means of geopolitical coercion, demonstrate Chinese leadership and know-how, and so forth. Examples of Xi’s propaganda messaging are his repeated claims to want to “save the world economy from recession” through a vague notion of unity—with “Chinese characteristics,” of course—as parroted by state-run media.

While China has certainly achieved some successes, as noted in part I, the end of the line for the “China miracle” may soon be in sight—and not just due to the exposure of gross mismanagement of the Chinese economy and persecution of its population through Xi’s zero-COVID policy.

Economic Statistics

Despite the never-ending rosy pictures painted about the Chinese economy by state-run media, the signs of intractable problems, decay, and decline are many, and all roads lead to the CCP in determining the underlying causes. China’s reported economic numbers and forecasts were rosy in the lead-up to the 20^th National Congress of the CCP last October. However, by the end of 2022, reality intervened, as GDP growth for the year was reported at just below 3.0 percent, which was well under the 5.5 percent official CCP target, as well as a sharp decline from 2021’s 8.1 percent increase in GDP.

The long-term effects of Xi’s Zero-COVID policy and the subsequent street riots in protest of the policy that escalated in the fourth quarter of 2022 massively impacted the Chinese economy. There is much more bad economic news as a result.

China’s boom economy appears to have peaked in 2021, with the World Bank forecast for GDP growth pegged at 4.3 percent for 2023, according to Fortune.

Total retail sales in 2022 dropped 1.8 percent from 2021.

Residential housing sales dropped by 24.3 percent in 2022, while total real estate sales dropped 26.8 percent.

A ticking timebomb, China’s off-books local debt topped $7 trillion in 2022, according to Zerohedge.

China’s annual consumer inflation rate accelerated in December and is expected to rise in 2023, as reported by Reuters.

Pessimism is increasing. The People’s Bank of China’s Employment Sentiment Index, which reflects the attitudes of average Chinese citizens’ prospects for jobs, fell to 33.1 in the fourth quarter of 2022, which was down from 35.4 in the third quarter, according to Bloomberg. In addition, “China’s Business Confidence index fell to 48.1 in December from 51.8 in November,” according to the World Economics’ survey of sales managers at over 2,300 companies, as reported by Zerohedge, with December’s number being the lowest since data was first documented in 2013.

Lastly, the Mercator Institute for China Studies (MERICS), which aggregates the predictions of the Eurasia Group, The Economist, Control Risks, and The China Project to produce its economic projections, opines that “one-time consumer spending rebound [after the termination of the Zero COVID-19 lockdowns] will not solve the long-term structural difficulties China’s economy faces, ranging from its real estate sector to debt levels.” And those “structural problems” were created by long-term mismanagement of the Chinese economy.

Demographics Issues

The Chinese population is now officially in decline, with the National Bureau of Statistics (NBS) reporting that “9.56 million children were born in 2022 while 10.41 million Chinese citizens died, a net population loss of 850,000.” This was the first drop since 1961 during the Great Famine under former leader Mao Zedong. And the number of deaths does not account for the massive increase in COVID-related deaths that have been incurred (but not officially reported) since the zero-COVID policy was dropped in December.

A big problem is that China’s fertility rate is only 1.3, according to the latest census completed by the NBS in 2020. A 2.1 “total fertility rate” (that is, 2.1 births per family) is the replacement rate that is needed to maintain stable population numbers in a given country. As a result, China’s birth rate hit a historic low in 2021, with only 6.77 births per 1,000 people. By comparison, in 2021, the U.S. birth rate was 11.06 per thousand.

In addition, China has a marriage problem. As reported by The Australian, “China has reported the lowest number of marriages in almost 40 years. … The number of first-time marriage registrations fell last year to 11.6 million, about 708,000 fewer than in 2021.”

As a result of the declining birth rate and a decreasing number of marriages, China is facing a serious looming old-age dependency ratio problem. That ratio is the number of people (elderly and children) that must be supported per 100 working-age persons. As the population ages, the costs of social welfare to be paid to retired people increases, placing increasing tax burdens on active workers.

According to Statista, China’s old-age dependency ratio has been steadily increasing over the past decade, hitting 46.1 per 100 workers in 2021. And according to an exhaustive global population study posted by the Lancet in 2020, China’s ratio will exceed that of the United States, United Kingdom, Germany, and Australia by 2050.

This single statistic—the old-age dependency ratio—signals the end of the CCP’s myth of the inevitable “rise of China.” A main contributing factor (besides massive foreign investment) to that myth has been the demographic dividend reaped from cheap Chinese labor, which has fueled much of the growth over the past three decades. And forced labor from Uyghurs and other oppressed minorities cannot make up for the demographic changes in the offing due to declining birth rates and a rapidly aging population.

The CCP’s decades-long one-child policy is the root cause of the problem and has been dropped, and Beijing is also trying to incentivize young Chinese women to have more children (recent examples in China Daily here and here). This is a complete policy reversal similar to the dropping of the failed zero-COVID policy!

Foreign Pressures

Other countries are awakening to communist Chinese mercantilism, threats, and general belligerence and are creating some serious headwinds that Xi will have increasing difficulty overcoming in his pursuit of Chinese hegemony über alles.

Major cracks in the Chinese leadership façade have been exposed now that Xi has dropped his zero-COVID policy. So much for China’s mercenary PPE and vaccine diplomacy (follow the yuan). So much for Chinese success in dealing with the virus now that a single official report of 60,000 dead from COVID-19 and another suggesting there is as much as 80 percent of Chinese infected have been repeated throughout Western media.

Concrete actions are being taken around the world to push back on Chinese economic and military aggression, decouple from supply chains dominated by China, and avoid the significant problems that are being uncovered in various projects under the Belt and Road Initiative (BRI, also known as “One Belt, One Road”).

The U.S. House of Representatives established via a large bipartisan vote the new House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party (CCP) that will “investigate and submit policy recommendations on the status of the Chinese Communist Party’s economic, technological, and security progress and its competition with the United States,” as reported by Fox News. Early actions involve sanctioning Chinese industries that employ forced labor, such as solar panel producers.

To level the economic playing field, Republicans in the United States Senate and House have introduced legislation that would end China’s permanent status as a “most favored nation” (MFN). MFN status has provided great economic benefits to China since first granted in 2001 through the implementation of the lowest tariffs, the fewest trade barriers, and the highest import quotas than other nations without MFN status. When passed into law, the United States will have joined at least “32 countries, including the European Union, the UK, Canada, Turkey, Ukraine, and Liechtenstein, [in ceasing] to apply MFN status to China” since 2020, as reported by Vision Times.

According to Zerohedge, the Netherlands, Japan, and the United States have set joint guidelines for what type of chipmaking equipment can be exported to China, which is aimed at limiting China’s access to advanced semiconductor machinery. This is on top of recently implemented unilateral U.S. export controls that ban Chinese companies from purchasing advanced chips and chipmaking equipment without a license.

Construction failures in various projects funded through Xi’s signature BRI are giving many nations second thoughts about their collaboration with the communists. The Wall Street Journal has reported that some of China’s mega infrastructure projects are “falling apart”:

• Thousands of cracks in the $2.7 billion Coca Codo Sinclair hydroelectric plant attributed to “bad quality of equipment and parts,” according to Ecuador’s former energy minister.
• The Chinese-built Neelum-Jhelum Hydropower Project in Nosari, Pakistan, has been shut down because officials due to cracks detected in a tunnel that transports water through a mountain to drive a turbine.
• Uganda’s power generation company identified more than 500 construction defects in a Chinese-built 183-megawatt hydropower plant on the Nile River.
• Completion of the 600-megawatt Karuma Hydro Power Project is three years behind schedule due to various construction defects, including cracked walls, according to Ugandan officials.

Reuters has also reported that Uganda has terminated its contract with Chinese firm China Harbour and Engineering Company Ltd. (CHEC) to build a $2.2 billion railway to the Kenyan border, which is a landward part of the BRI.

A lot of the $1 trillion Chinese investment in BRI infrastructure projects appears to be going up in smoke. As the news propagates about these problems, fewer and fewer countries will be willing to take the money and the risk.

And then there are the burgeoning alliances that have been stimulated by the Chinese military’s intimidation of Taiwan, the Philippines, Japan, and India. The world is awakening to the multidimensional threat posed by the CCP.

Concluding Thoughts

The CCP is facing some heavy headwinds in Xi’s quest to displace the United States as the world’s hegemon, many of which are of their own making. The inevitability of China’s rise—a myth propagandized for decades by the communists—is looking more and more like fiction, as the above observations about China’s economy and demographics problems would appear to indicate.

The CCP is anything but flexible (except when facing existential threats to its political power); solving these self-made problems will require a nimbleness that escapes most communists. After all, “efficient communist management” is an oxymoron, as history has shown. Given the preceding, the future lies in the “inevitability of the CCP’s decline.”

Read part I here.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.