The China Bubble Is Losing Air But Won’t Burst
The nation has an unparalleled record of surmounting crises.
Chinese President Xi Jinping disembarks from the plane upon his arrival in Nur-Sultan, Kazakhstan September 14, 2022.
Photographer: Press service of the President of Kazakhstan/Handout/Reuters
Is China’s economic miracle over? Covid-19 lockdowns, a real estate meltdown, and a crackdown on entrepreneurs add up to a lot of downers. The latest forecasts show growth for 2022 at risk of sliding below 3%, well short of Beijing’s 5.5% target. The response from President Xi Jinping and his team so far has been improvised and underwhelming, a stark contrast with the huge government rescue plans in the past.
If China is in for a hard landing, the consequences would be cataclysmic: for the financial system and economy, crisis and recession; for the ruling Communist Party, a shift from legitimacy based on prosperity to control underpinned by repression; for global markets—already reeling from the war in Ukraine and the US Federal Reserve’s rate hikes—a shock that rivals 2008’s Lehman moment.