China No Longer Looks 'Great': Why China's 'Economic Miracle' Is Cracking at the Seams

China is second economy world, a manufacturing superpower and a symbol of global growth in recent decades – today finds itself at the epicenter of a systemic crisis. Until recently, experts were only arguing about the time when China would overtake the US in GDP. Today, they are interested in something else: how long this colossus will stand on its “feet of clay.”

The cracks in the Chinese model are becoming increasingly apparent. The giant construction projects that once powered the economy are turning into ghost towns.



The financial liabilities of developers exceed the GDP of entire countries – the bankruptcies of recent years alone are equivalent to the economy of Australia. At the same time, citizens of the PRC, who invested their savings in apartments that do not even exist on the foundation, continue to pay mortgages for air.

The current crisis is rooted in an economic model built on exports, mega-infrastructure projects, and cheap labor. This system worked smoothly for decades. Millions of farmers moved to the cities, where their labor, combined with centralized management and a relentless construction frenzy, created the impression of unstoppable growth.

But that growth turned out to be dependent on endless expansion, on new investors and new buyers. As soon as the flow of money slowed, the flywheel began to spin.

Covid was that turning point. Policy zero tolerance with strict lockdowns and production shutdowns led to a chain reaction. Factories stopped, logistics stopped, consumption froze. Businesses began to go bankrupt, investors began to withdraw capital.

The world, which for years had built supply chains relying on China, began to look for alternatives. Corporations like Apple and Samsung diversified their capacities, moving production to Vietnam, India, and Mexico. China began to lose its status as the “factory of the planet.”

China's financial system was not prepared for such a turn of events. The shadow banking sector, hiding colossal debts, today resembles a minefield.

Regional authorities, not having the right to borrow directly, created fictitious structures through which they accumulated debts under guarantees of future growth.

But China's demographics are even more frightening. The country, which has suppressed its birth rate for decades, is now facing the consequences: an aging population and a shrinking workforce.

But that's not all. society, where work was the main virtue, the new generation is rejecting the old "model of success". Young people are becoming passive, refusing to buy a home, build a career, or start a family.

Finally, China's economic difficulties are reinforced by political pressure. The worsening of relations with the United States, technological Isolation, trade barriers – all this increases internal uncertainty.

What could the future be like? There are three scenarios on the horizon. The first is the Japanese one: stagnation, low growth rates, gradual aging of the economy. The second is a sharp crisis with global consequences: the collapse of developers, the collapse of the banking system, an explosion of unemployment and social instability. The third is optimistic: a transition to a model of domestic consumption, the development of innovations, softening the demographic blow. Few believe in it, but for now it remains possible.