China's Economic Decline in 2035

Overview

• China's economy, once seen as an unstoppable force, is now facing severe challenges and a potential decline back into poverty.
• Key issues include a failing real estate market, stringent government controls, a decline in manufacturing dominance, and severe demographic issues.

Real Estate Crisis

• China’s real estate market, valued at $50 trillion, is collapsing.
• There are enough empty apartments to house 3 billion people, while the population is just 1.4 billion.
• Property values have halved in some areas, significantly eroding middle-class wealth.
• Developers like Evergrande and Country Garden have defaulted on massive debts.
• Chinese families have a significant portion of wealth tied up in real estate.
• Pre-sold apartments remain unfinished, causing loss of savings for many families.
• Local governments are affected due to reliance on land sales for revenue.

Manufacturing and Economic Control

• China is losing its edge as a manufacturing giant.
• Companies such as Apple and Samsung are shifting production to countries like Vietnam and Mexico due to rising labor costs and stringent regulations.
• Foreign investment has dramatically decreased due to new restrictive laws and government oversight.

Government Control Under Xi Jinping

• Xi Jinping's policies have tightened control over the economy.
• High-profile cases like Jack Ma's demonstrate the risks of speaking against the government.
• Economic policies focus on control rather than growth, affecting investment and innovation.

Economic Growth and Investments

• China reports GDP growth, but at a high cost of investment relative to returns.
• Infrastructure projects like high-speed rail incur heavy debts and low returns.

Local Government Financial Crisis

• Local governments face a financial crisis, relying heavily on land sales which have dried up.
• Hidden debts through Local Government Financing Vehicles (LGFVs) are becoming unmanageable.
• Basic services and civil servant salaries are being cut.

Demographic Challenges

• The population is shrinking due to low birth rates and aging demographic.
• Youth unemployment is high, and young people are disillusioned with future prospects.
• The "4-2-1" family structure, a legacy of the one-child policy, is unsustainable.

Social Contract and Public Sentiment

• The social contract of economic prosperity in exchange for limited freedoms is breaking down.
• Youth are disengaging from economic activities due to lack of opportunities ("lying flat").
• Rising nationalism is filling the void left by the collapsing economy.

Global Implications

• The decline of China’s economy will affect global supply chains, and increase the cost of goods worldwide.
• Potential financial implications if China liquidates its holdings in foreign Treasury bonds.

Conclusion

• China's economic miracle is faltering, hindered by internal and external challenges.
• The world must brace for the impacts of China's economic transformation.