What Is the True State of China’s Economy?

February 13, 2021 Updated: February 14, 2021


Different opinions are being expressed about the state of China’s economy, and recent remarks by Premier Li Keqiang can provide a clue as to the truth.

Li spoke about the bankruptcy of micro-, small-, and medium-sized enterprises during a State Council executive meeting on Feb. 3, days before traveling to Shanxi Province to visit poverty-stricken households there.

On the international front, Li spoke via video conferencing to the 48 Group Club, a London-based nonprofit that promotes UK–China trade, on Feb. 3. Two days later, he had a dialogue with some European entrepreneurs, urging friendship and development.

“Faced with the impact of the epidemic and the deep decline of the world economy,” the Chinese regime has “resolutely adopted effective macro policies and achieved good results at a reasonable cost,” achieving “a 2020 growth rate of 2.3 percent year-on-year,” Li stated in his talk with the Europeans.

He also claimed that the number of micro-, small-, and medium-sized enterprises and individual businesses in China had reached 130 million, and that China would adhere to its policy of opening markets.

Li obviously is exploring every possible avenue to attract European capital and technology and to expand China’s market in the EU, in order to make up for losses attributed to U.S. sanctions.

But the picture that Li has painted of China’s economic well-being is actually far from the truth. On Feb. 7, when he visited Yuncheng city, Shanxi Province, he learned that locals had burned fruit tree branches and straw pellets to make fires for cooking and heating—to which Li remarked that in the northern region, heating sources must be decided based on “local conditions” in order to find the most suitable choice between coal, electricity, and gas.

“It should be based on the actual feelings of the people. And we must make them feel like the choice is useful, economical, and convenient,” He said.

Li’s inspection tour provides sobering evidence of the real-life conditions of Chinese people at the bottom rung of society, who must resort to the most primitive form of fuel just to make food.

Beijing’s recap of Li’s trip, which was posted on the State Council’s website, also said that Li stopped by a citizen’s home and asked him whether his family had any inconveniences. The citizen replied that the water supply wasn’t reliable and they had no heating in the winter.

Li also distributed some items for the Chinese New Year among the poor. While such token gestures don’t solve these people’s poor housing and heating conditions, it portrays the real life of ordinary Chinese people and thoroughly debunks the state media’s deceptive propaganda.

At the Feb. 3 State Council executive meeting, Li emphasized the need to “refine” policies for bankrupt micro- to mid-sized firms.

“There are currently more than 130 million registered market entities nationwide. … It is necessary to simplify the ‘cancelation’ system for micro, small, and medium-sized enterprises so that they can easily open up and easily exit … in a timely manner,” he stated.

While it seems that when Li mentioned “more than 130 million” Chinese companies, he knew that many of them had actually closed and ceased to operate; because it’s difficult to “cancel” them, they are still considered registered companies. Even bankruptcies aren’t valid unless approved by the Chinese Communist Party (CCP).

Without a formal cancellation, they are still classified as normally operating enterprises.

The 130 million companies roughly equate to one company for every 10 people in China, a situation that indicates a serious unemployment problem. Economic growth is even more unlikely. The Chinese regime claimed that the country experienced 2.3 percent growth in 2020, but I believe it’s actually a negative number.

At the State Council meeting, Li also explained in detail one of the benefits of China joining the Regional Comprehensive Economic Partnership (RCEP) free-trade agreement, signed by 15 Asia–Pacific countries. He said the agreement’s provisions on rules of origin allows a product made with materials originating in RCEP member states to be labeled as being made with materials in the producing country.

The implementation of this provision makes it easier to gain tariff preferences.

To put it bluntly, the CCP’s main purpose of joining RCEP is to use the re-export trade of other countries to conceal the true origin of products and bypass U.S. tariffs currently imposed on Chinese imports. That also proves that the CCP’s “internal circulation” theory simply doesn’t work, and it still must rely on the export to the United States of a large number of products in disguise.

On Feb. 3, Li also participated in a video session held by the 48 Group Club.

“There will be no ice that cannot be broken or differences that cannot be settled,” Li said according to the Chinese foreign ministry’s readout. “China always attaches great importance to developing bilateral relations with the UK, and promoting economic recovery.”

This shows that Li is eagerly looking for export channels, as relying on “internal circulation” is not enough.

On Feb. 5, state-run media Xinhua published a commentary titled “The trend of economic and trade exchange cannot be stopped; how to correctly grasp the direction of Sino-U.S. relations,” which repeatedly emphasized “the irreversible trend of Sino–U.S. economic and trade cooperation.” It indicates that isolation from the international community has caused considerable economic trouble for China, and that the CCP is eager to break through the barriers.

Li’s recent activities have made it clear that China’s economy is in urgent need of U.S. and Western investments, technology, and markets. However, while trying every possible means to deceive the international community and to attain its goal of hegemony, when will the CCP learn that the Chinese people’s livelihood should come first?

Zhong Yuan is a researcher focused on China’s political system, the country’s democratization process, human rights situation, and Chinese citizens’ livelihood. He began writing commentaries for the Chinese-language edition of The Epoch Times in 2020.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.