By Deyu Wang and Zili Yang

Chinese year of the rat does not seem to bode well for Xi-Jinping regime. With China recording the lowest GDP growth in 2019, in 30 years, at 6.1%, 2020 has only been worse due to the pandemic.

In 2020, China’s economic presence began to collapse: Beijing openly acknowledged an economic downturn for the first time since 1976. The National Bureau of Statistics announced on April 17 that it was 6.8% in the first quarter of the year. Surprisingly in May, during the annual National People’s Congress on May 22, the target for GDP growth was not announced for the first time in 30 years. This event has always been an indicator of the CCP’s economic confidence, and its absence for the public highlights that China is facing serious problems. However, the COVID-19 pandemic, which began with an outbreak in the Chinese province of Hubei, is not to blame. It has only aggravated the difficult situation which the CCP was disguising with the help of propaganda.

China’s GDP, which showcased double-digit growth rate since 2003, peaking at 14.2% in 2007, has been on a steep decline since then. In 2018, it was 6.6%, in 2019 – 6.1%, reaching the lowest threshold since 1990.

The reason for this is fundamental problems of the Chinese economy, which have accumulated over the years: excessive investment, low labour productivity, modest consumer spending and demographic changes. In the 1990s and 2000s, China created wealth in a way that was appropriate back then. Factories grew, producing competitive products for the whole world, miles of bridges and roads were built connecting cities and towns. These investments created jobs and income generating opportunities for the population, while expanding the productive potential of the economy. But such methods do not always increase a country’s production potential or growth potential: bridges and roads are literally being built “to nowhere”, just like “ghost towns”. In addition to excessive infrastructure costs, China is also increasing consumer and industrial spending by expanding its credit availability system. The country has accumulated a huge amount of debt, not just internally but externally as well. In 2019, China’s total corporate, household and government debt rose to $40 trillion. This is about 300% of its GDP and about 15% of all world debt. As the economy began to decline, many industries and enterprises in China shut down, leading to massive layoffs, and slowing wage growth. Unemployment began to grow at the beginning of 2019 it was 5.3%. While at the end of 2019, the pro-government newspaper Global Times published a forecast that the situation in 2020 will only get worse, unemployment will rise, and wages will fall.

Over the past two years, the volume of Chinese consumer goods market has declined: the purchasing power of the population is falling. Demand for cars, real estate, and other goods accustomed to double-digit annual growth rates is declining. The situation is aggravated by the huge income disparities between the wealthy coastal regions and the hinterland.

On May 28, PRC Premier Li Keqiang admitted that there are over 600 million people in China, whose monthly income barely reaches 1,000 yuan ($ 140), which is not enough to rent even a room in Chinese cities. If the leader of a communist state, always seeking to hide its shortcomings, makes such a statement, then we can safely assume that this is just the tip of the iceberg.

China’s demographics are also not conducive to economic growth. China is aging, with its working-age population shrinking since about 2012. The inevitable result of the 1979 one-family-one-child policy, according to experts, will lead to retirees making up over 40% of China’s population by 2050. This will test the CCP’s ability to provide for its people by providing them with a decent life, stability, and employment for its young population. These elements formed the basis of CCP leader Xi Jinping’s “Chinese Dream” plan. According to him, by 2020, China has set itself the goal of eliminating absolute poverty throughout the country while improving quality and standard of living of its people.

However, the first 9 months of 2020 demonstrate that this goal is far from being achieved with the steep economic meltdown and failing domestic as well as foreign policies.