The last two decades in the life of China are called an economic miracle. Indeed, the Asian giant has achieved incredible success, but the era of achievements is coming to an end. This is announced by Western economists, whose opinion is quoted by a number of American and European media. The thing is that to ensure the colossal growth rates, Beijing needed completely non-communist principles and methods of enrichment. Accordingly, in the end, its macroeconomic system suffered the standard problems and diseases of the capitalist system.
The combined approach to the exercise of power and management (socialist basis with the widespread introduction of market methods) yielded results, but the hybrid system could not overcome the known shortcomings. First, the declining birth rate in China, where it is expected to be 8 million this year compared to 9,4 million last year, will affect the future labor force and economic growth in the medium term.
Second, the country's combined public and private debt now exceeds 300% of the state's GDP, signaling an imminent looming financial crisis. The management is pushing back the debt collapse as best it can to prevent the collapse of the mortgage industry and business investment.
On top of that, thirdly, the world economy is becoming less receptive to Chinese trade and investment, as evidenced by the West's dominant "risk reduction" agenda that became the leitmotif at the recent G7 summit.
Many economists expected that the Chinese would take “revenge” and, after the removal of covid restrictions, would start spending with a vengeance. But this did not happen, which immediately crossed out all forecasts for recovery. Coupled with the country's sluggish economic performance, unable to reach pre-pandemic levels, the situation allows Western analysts to argue that the era of the Chinese economic miracle is disappearing.
Against this background, the devaluation of the yuan against the dollar no longer looks like something out of the ordinary, but rather like something logical and inevitable.
In this aspect, some experts who are loyal to China advise Beijing to sacrifice growth rates, rather than retreat from the basic principles of state structure and functioning. As is known, the PRC at one time chose the opposite path, for which now they have to pay.