Over the past few months, the conventional picture of China’s meteoric rise to economic dominance has been cast into serious doubt. Numerous economic indicators are pointing toward a significant slowdown. In the past month alone, manufacturing has hit a nine-month low, steel prices have fallen dramatically, and investors have begun pulling their money out of the country.Yet while many analysts continue to see this as a minor blip on an otherwise upward trajectory, Minxin Pei, one of the most insightful China watchers, isn’t so sure. In a new piece at Foreign Policy, Pei argues that the recent troubles are signs of much more serious underlying problems that threaten the nation to its very core. Like the Soviet Union and Japan before it, China may be in for a long and painful fall:
The current economic slowdown in Beijing is neither cyclical nor the result of weak external demand for Chinese goods. China’s economic ills are far more deeply rooted: an overbearing state squandering capital and squeezing out the private sector, systemic inefficiency and lack of innovation, a rapacious ruling elite interested solely in self-enrichment and the perpetuation of its privileges, a woefully underdeveloped financial sector, and mounting ecological and demographic pressures. Yet even for those who follow China, the prevailing wisdom is that though China has entered a rough patch, its fundamentals remain strong.
Read the whole thing.