President Xi’s Perfect Storm

The lockdowns in Shanghai and other Chinese cities that President Xi adopted to prevent the spread of the pandemic has tripped the country’s economic growth by interrupting the purchases of apartments. The irony is that the virus that began in Wuhan has triggered a sharp decline in China’s rate of economic growth. Suddenly, many of the books and articles about the country’s challenge to U.S. hegemony appear outdated. The implicit assumption in these books and articles is that China will continue to achieve an economic growth rate of 4–5 percent a year. The irony in applying the Thucydides metaphor is that China is now aging more rapidly than the United States because of the belated impacts of the one-child policy that it adopted in the early 1980s. President Xi Jinping now faces “a perfect storm”; its other elements include a financial implosion as apartment prices cascade downward, the loss of its international competitive advantage to Vietnam and to Bangladesh and to other countries that have much lower wage rates, and the departure of the multinational firms that provided the brand names that made it easy to sell goods produced in China in foreign markets. The 2020 decade for China will be similar to the 1990s in Japan, when its growth rate fell below 1 percent in response to the implosion of the massive asset price bubble that had developed in the second half of the 1980s.