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“And the man in the suit has just bought a new car/ From the profit he’s made on your dreams” — Traffic
Leftist online personality Hasan Piker recently took a trip to China, and — like many other influencers who have been there — declared it to be a paradise, praising “abundance style consumption paired up with a centrally controlled economy” and “1950s Soviet era building blocks next to the Gucci store”.¹ Meanwhile, pro-China pundits continue to crow about the country’s technological achievements and export performance.
But when you talk to ordinary Chinese people about what their lives or their families’ lives are like these days, a less rosy picture emerges. Helen Gao writes:
Behind the orderliness of everyday life, a quiet desperation simmers. On social media and in private conversations, there is a common refrain: worry over joblessness, wage cuts and making ends meet…
Internationally, China looks strong…That muscular facade is punctured here in China, where despair about dimming economic and personal prospects is pervasive. This contrast between a confident state and its weary population is captured in a phrase Chinese people are using to describe their country: “wai qiang, zhong gan,” roughly translated as “outwardly strong, inwardly brittle.”…
Many now feel the very state policies that have made China appear strong overseas are hurting them. They see a government more concerned with building global influence and dominating export markets than in addressing the challenges of their households…These days, there is a sense of bitter anger among the people at being the voiceless victims of the state’s obsession with world power and beating the United States…The government recently began cracking down on social media content it considered “excessively pessimistic” — a clear sign it is concerned about this public unease undercutting its agenda.
For even more direct insight, I recommend the blog Reading the China Dream, which translates Chinese writing and online commentary. The blog has a good translation of a recent report from a Chinese marketing company on morale among the youth. Here are some excerpts from the bloggers’ summary:
The text translated here is [the] last of a series meant to sum up 2024 and preview 2025…[T]he tone of the text is unsparingly bleak: the China Dream has stalled and no one knows what to do about it…Chinese young people inherited great expectations from China’s phenomenal economic rise, which began to slow in the 2010s, and from the democratization of China’s higher educational system…This ringing success has fallen flat because the job market has not kept up with university expansion. Consequently, China’s vulnerable generation…find themselves in a limbo defined by a flat job market, stagnant salaries, and high prices, especially for real estate…This appears to be where China is now: school is a marathon, but nobody wins.
And this is from the translated report itself:
The number of young people who are depressed or anxious continues to rise, and young people have the worst emotional state of all age groups. The China National Mental Health Report (2019-2020) shows that young people aged 18-34 have the highest anxiety level; at the same time, people’s mental health level has dropped significantly compared with ten years ago.
Young people’s emotional problems are becoming more and more serious, especially in the context of fierce competition in education…As a result, emotional problems tend to emerge at a younger age. Through longitudinal comparison, the China Youth Research Center found that between 2015 and 2020, the sense of hope of primary and secondary school students decreased by 11.8 percentage points.
This all fits with everything my Chinese expat friends tell me about how their relatives are faring back home. It also fits with the descriptions of young Chinese people’s disillusionment in Dan Wang’s recent book Breakneck.
Essentially, it seems as if Chinese people — especially young people — are stuck on a treadmill. China’s young people are studying hard, getting a college education, and putting in grueling long work hours. And yet youth unemployment rates are rising relentlessly, many college graduates can’t find the kind of white-collar work they trained for, and wage growth is sluggish. To a huge number of Chinese people, the modern Chinese economy is less of a “Chinese Dream” than a Sisyphean nightmare.
In fact, the word “treadmill” also hearkens back to where China’s problems began. Way back in 2010, hedge fund manager Jim Chanos declared that China’s real estate market was on a “treadmill to hell”. That prediction was way too early — the real estate market probably didn’t become a bubble until the late 2010s, and didn’t begin to crash until near the end of 2021.
But crash it eventually did, and four years later it’s still in a protracted state of collapse. Despite government support, Chinese property prices are still falling:
China’s home-price slump worsened in October, ending a traditionally peak sales season with a weak reading as recent loosening measures failed to revive the moribund market…New-home prices in 70 cities, excluding state-subsidized housing, dropped 0.45% from September, the steepest decline in a year, National Bureau of Statistics figures showed Friday. Resale home values fell 0.66%, the fastest slide in 13 months.
This price decline is a catastrophe for regular Chinese households. Even more than in most countries, Chinese households have their wealth concentrated in real estate. The stock market is underdeveloped, and bonds have crappy interest rates,² so people save money by buying houses or housing-linked bonds. When real estate prices go down, it means Chinese people are getting poorer and poorer, despite working hard and living frugal lives.
The property bust is also weighing on the macroeconomy. Property investment is down almost 15% since a year ago. This is a big reason why unemployment is rising, wages are stagnant, and lots of college grads can’t find jobs commensurate with their skills.
For a while, China used manufacturing investment to fill the economic hole left by real estate. The country embarked on the greatest industrial policy push in human history, spending an estimated 4.4% of GDP on manufacturing subsidies of various kinds. Industrial lending and output surged, keeping GDP growth from collapsing even as the real estate sector floundered.
But this strategy also hit its limits. It turns out that if you pay a whole bunch of companies to make the same products, they end up competing viciously with each other, and their profits evaporate. Here are some excerpts from a recent story in the Atlantic about China’s EV industry, which is both beating the world and floundering financially at the same time:
The Chinese electric car has become a symbol of the country’s seemingly unstoppable rise on the world stage…[But] bloated by excessive investment, distorted by government intervention, and plagued by heavy losses, China’s EV industry appears destined for a crash. EV companies are locked in a cutthroat struggle for survival. Wei Jianjun, the chairman of the Chinese automaker Great Wall Motor, warned in May that China’s car industry could tumble into a financial crisis; it “just hasn’t erupted yet.”…
Dunne Insights, a California-based consulting firm focused on the EV industry, counts 46 domestic and international automakers producing EVs in China, far too many for even the world’s second-largest economy to sustain…In most economies, the market would sort out this mess by culling the weakest players…In China, state support or ownership of automakers extends the life of struggling businesses. Local governments are also reluctant to lose the jobs they bring, so officials prop up unprofitable companies. The city of Wenzhou recently helped arrange financing for an EV maker called WM Motor, to get the company’s local factory humming again. The city of Hefei rescued the EV