Recently from The Signal: Martin Wolf on why global trade is slowing down. … Today: What’s wrong with China’s economy? Victor Shih on the major reckoning facing the government in Beijing. … Also: Gustav Jönsson on America’s tricky relationships with dictators. … & now live: Your invitation to become a founding member of The Signal. Subscribe to The Signal? Share with a friend. … Sent to you? Sign up here. Can’t get out of it Owen Winkel After decades of booming growth that lifted tens of millions out of poverty, China’s economy seems to be stalling. It barely grew during the second quarter of this year—just 0.7 percent over the previous three months. Even high-tech companies are laying off workers and cutting salaries. In June, youth unemployment hit 17 percent. Retail sales tanked, hitting an 18-month low. And across China, people seem to be feeling it: In a survey last year, only 39 percent of respondents said they were better off than they’d been five years ago. Meanwhile, foreign investors are dumping Chinese stocks. For the first time since Beijing opened the Chinese market to outside investment in 2014, there’s a net outflow of capital. Now, economists around the world are revising their forecasts for the country’s 2024 GDP growth—in the wrong direction. What’s going on? Victor Shih is the Ho Miu Lam Chair in China and Pacific Relations at the University of California, San Diego, and the author of Factions and Finance in China: Elite Conflict and Inflation. The Chinese government, Shih says, is facing a complex set of reckonings: The population is shrinking, the housing market has collapsed, and local governments are going broke. At the same time, the Chinese Communist Party’s General Secretary Xi Jinping is having trouble making timely decisions on the economy—having so much power now that he has to make timely decisions in nearly every other policy area, too. The biggest problem, though, is the national debt. It’s gotten so big, Shih says, that Beijing just can’t lift the country of a slump doing the things it used to do … Read on The Signal is a new current-affairs brand for understanding democratic life, the trend lines shaping it, and the challenges confronting it. Learn more. And join—to be a valued member, support our growth, and have full access. Advertisement From Victor Shih at The Signal: “One big structural problem is a real-estate bubble that’s been deflating for years. The government tried to pop it in 2022; that sent housing sales and investments into a downward spiral; and the economy still hasn’t recovered.” “There were a lot of service-sector jobs in major cities like Beijing and Shanghai. Investors put millions of dollars into restaurants and bars, and these places often hired college graduates from second- and third-tier universities. Sure, working at a bar might not be a college graduate’s dream job, but they made the same salary as government workers—about ¥5,000 to ¥6,000 a month, somewhere between $700 and $900. That could support a decent middle-class lifestyle for a young person in a big city. But a lot of those jobs are gone now—thanks to government policies, from Covid measures to industry crackdowns.” “Now, there’s a real problem with white-collar unemployment. STEM graduates from China’s top universities don’t tend to have any problems finding work, but economics or finance majors—even if they’re from a prestigious school like Peking University—aren’t getting the jobs they want. They used to land at Goldman Sachs or one Chinese investment bank or another, but those jobs have almost completely dried up.” Read on The world is highly complex, rapidly changing, and inherently uncertain … That’s why we look at it the way a detective would: Everything The Signal does starts with good questions, and every answer leads us to more of them. Become a member to unlock this full conversation and explore the archive. Advertisement Why is democracy struggling so much around the world? Read The Signal’s first print extra, The Long Game. Limited copies available now. Learn more NOTES It depends on what dictator The White House When U.S. Vice President Kamala Harris gave her speech to the Democratic National Convention this summer, she said that her presidential rival, Donald Trump, “won’t hold autocrats accountable” and that she “will not cozy up to tyrants and dictators.” It’s a familiar message: The New Yorker recently published a cartoon of a mustachioed caudillo on the psychoanalyst’s sofa, complaining “It’s like Trump is deliberately praising every brutal dictator except me.” But the U.S. has a long and complicated history of dealing with dictators. Has Trump really represented a shocking kind of departure from it? Franklin Delano Roosevelt, well remembered for leading the U.S. into war against the tyrannies of the Third Reich and Imperial Japan in the 1940s, once praised the Soviet Union’s Joseph Stalin as “truly representative of the heart and soul of Russia;” Richard Nixon gushed over Spain’s Generalissimo Fransisco Franco when visiting Spain in 1970; and Ronald Reagan once complimented Guatemala’s president Efraín Ríos Montt a “man of great personal integrity and commitment.” It’s true that when Trump goes so far as to call Egypt’s president Abdel Fattah el-Sisi his “favorite dictator,” that might appear crass and unseemly, even against this historical backdrop. But it’s been official U.S. policy—before and after Trump—to prop up Sisi’s regime. When Sisi ousted President Mohamed Morsi in 2013, President Barack Obama refused to call it a “coup,” since he would then be legally obliged to cut off military aid—and the U.S. has supported Sisi ever since. Earlier this month, the Biden administration announced it’d override congressional human-rights conditions to send Egypt $1.3 billion in military financing. —Gustav Jönsson Explore Notes Want more? Join The Signal to unlock full conversations with hundreds of contributors, explore the archive, and support our independent current-affairs coverage. Become a member Coming soon: Isaac B. Kardon on the growing frequency of military confrontations in the South China Sea … This email address is unmonitored. Please send questions or comments here. Find us on Linkedin and X. To advertise with The Signal, inquire here. Add us to your address book. Unsubscribe here. © 2024