China at its peak? Think again

We must not be swept up by the “Peak China” rhetoric.

HAN WOO-DUKThe author is a senior reporter of the China Lab. Many experts predicted the “fall” of the Chinese economy. Many foreign books about the collapse of China and a global economic crisis originating in China were translated and published. But they were all wrong. The Chinese economy continued growing despite all the twists and remains the second largest economy in the world.

Now, people talk about “Peak China” — a diagnosis that the Chinese economy has reached its growth limit. The claim is garnering attention in Korea after The Economist ran a report on the issue in May. When YouTubers say, “That’s right, China’s era is now over,” many viewers click on their videos. Are they right this time?

The pessimism surrounding the Chinese economy sounds quite convincing. China’s state-led development has certainly faced limits. Growth engines are weakening due to local governments’ rapidly increasing debts, excessive investments in real estate, tightened internet regulation and population decline. The private sector has lost vitality due to the political rhetoric of “common prosperity.” A notable sign is the youth unemployment hovering above 20 percent.

But one question remains. “Why is Xi Jinping doing nothing about it?” In the past, the Chinese government would increase liquidity and lift real estate regulations to crank up the economy. It also removed the shackles on online platform companies. But Beijing is not doing that. Instead, it maintains the stance that there will be no artificial booster.

China talks about strengthening its economic fundamentals. It wants to create a sustainable growth structure by breaking the vicious cycle of growth creating distortion. They would rather define it as “high-quality development.” There is no sign of retreating the rhetoric of common prosperity.

It remains to be seen whether China is at its growth limit or is in the process of developing a high-quality economy. One thing is clear, that “innovation” certainly existed even during the “distorted growth.” The internet revolution that has been in full force from 2010 is expanding to next generation industries such as AI, electric vehicles and new materials.

In many fields, China has overtaken or threatens Korea.

The Chinese economy is still moving on. National resources will be concentrated on eight strategic new industries, including new material, high-tech equipment manufacturing and new energy vehicles. The state is promoting the “new national system” of mobilizing all science and technology resources. The semiconductor sector is one of the target areas.

These movements cannot be spotted with the fragmentary “The era of China is over” view. If we miss these movements, we may lose greater things. We must not be swept up by the “Peak China” rhetoric.