Since the new year, several Japanese research institutes have released reports suggesting that the growth of China’s gross domestic product was around 5 percent in 2023 and will drop to 4 percent in 2024. U.S.-based Chinese economist Li Hengqing agrees that China’s economy will continue to decline, but he believes that China’s GDP statistics do not hold real meaning since, to begin with, they’ve been manipulated.
Mr. Li is a U.S.-certified public accountant who witnessed the Tiananmen Square Massacre in 1989 and was imprisoned by the Chinese Communist Party (CCP) for a year after he participated in the protests.
On Jan. 3, The Epoch Times interviewed Mr. Li about the current trends in China’s economy.
On March 5 last year, the State Council of the CCP submitted its budget for the new year, setting its GDP growth target at around 5 percent, its lowest in nearly 30 years.
According to Mr. Li, the CCP set this target due to its uncertainty around economic growth after three years of the COVID-19 pandemic.
“Some people think that after three years of pandemic restrictions, there will be an increase in revenge spending in China after the restrictions were lifted,” he said. “That’s why the GDP growth target was set at around 5 percent.”
“However, this simply turned out to be an illusion,” Mr. Li said.
Looming Economic Crisis
Over the years, the CCP has relied on investment, export, and consumption to boost the economy. However, in 2023, China’s economy was in turmoil, and since then, Evergrande Group, Country Garden, and other leading real estate companies have been on the verge of collapse. Their stock prices have plummeted. Many companies in China have closed down, and a large number of people have become unemployed.
The changing global economic context has accelerated this crisis. Foreign capital and companies have been withdrawing from China. The industrial chain and supply chain have been relocated to other countries, and the Western countries led by the United States have been blocking China’s access to semiconductors and other technologies. The consensus in the West is to stop China’s plans for global expansion.
“As a result, [China’s] export has come to a standstill,” Mr. Li said.
“The turbulent relations between the CCP and other countries have led to a decline in China’s exports. The money that the CCP is pouring into the Belt and Road Initiative is like issuing credit, and it is not clear when it will be paid back. This is likely to turn into bad debts. China’s financial situation is so bad that banks are reluctant to increase their foreign debt,” he said.
“When domestic demand and consumption both decline, the only thing left is investment and state purchases. The so-called state purchases are government-funded infrastructure projects. The CCP does not want to do more of this to avoid going into debt,” he said.
GDP Growth
According to Mr. Li, China’s GDP figures are meaningless to ordinary Chinese people.“If the economy has developed, it means that the people can feel it, but the actual life of the [Chinese] people is inconsistent with the GDP growth. What people truly are feeling is that they cannot find a job and that they cannot pay bills,” he said.
“So I think this 5 percent or so GDP growth rate was manipulated through government purchases,” Mr. Li explained. “For example, when the building of a warship and the expenditures of the state security forces go into the GDP, these are all government purchases, and they do not have a positive impact on people’s lives. These projects only add to the burden of the people. Only when the economic well-being of the people improves will there be meaningful economic growth.”
‘No Hope For the Future’
Mr. Li offered little hope of China having an economic turnaround any time soon.“China’s future economic trend can be predicted. That is—it will get worse every year,” said Mr. Li. “The economic growth rate will be declining next year compared to this year.”
“So what is the basis for this?” he prompted.
“First of all, there is the withdrawal of a large amount of foreign capital, the exodus and ‘de-Chinaization’ of the supply chain,” he said.
“Secondly, the people have no hope for the future. They do not dare to consume and cannot afford to consume. Once accounted for more than 30 percent of China’s GDP was the real estate industry, the large number of [real estate] companies in turmoil will inevitably affect people’s lives. The marginal efficiency of government purchases is dropping, and since the CCP restricts innovation, government purchases will get weaker and weaker. This is the main trend,” he said.
“Of course, unless China undergoes a radical change, for example, China becomes a free and democratic country, with a business environment based on the rule of law, not the rule of man, then businesses will recover. Only then will confidence be restored, the economy will recover and prosper, and China’s GDP will stabilize.”
