The “peak China” argument was not completely without merit. The traditional pillars underpinning China’s rapid economic growth have crumbled. The country’s rapid urbanisation, the key engine powering the country’s development since late 1990s, has slowed or even stagnated, leaving local governments with a massive debt hangover and widespread property market woes. China’s demographic picture has also turned from a blessing to a curse, with a shrinking labour force and a rapidly ageing society amid plummeting birth rates.
These structural changes at home have taken place in tandem with a less friendly external environment, as growing hostility from the US-led West has given rise to tech and trade wars.
Many economists cited China’s falling “total factor productivity” – a broad measure of how much output can be produced from a certain amount of inputs – to claim that China’s reliance on state investment to spur growth is at best beating a dead horse and at worst “quenching thirst by drinking poison”. Institutional changes needed to unleash economic vitality, such as deregulation and privatisation, have become hard to implement because they are no longer aligned with Beijing’s priorities, which now lean towards security and control.
