Published on October 29, 2019. Based on an essay by Sekihei published in the Sankei Shimbun on October 24, 2019, this article examines China’s slowing growth, the decline of exports, investment, and consumption, the expansion of social instability, and the limits of the Belt and Road Initiative and military expansion strategy.

October 29, 2019.
The “three carriages” that drive economic growth—the expansion of consumption, exports, and investment—have all gone bad, and therefore the economy has no way to grow.
The following is from an essay by Sekihei published in the Sankei Shimbun on October 24 under the title “China’s Economy at the Brink.”
The gross domestic product (GDP) for the July-September quarter of 2019, announced by China’s National Bureau of Statistics on the 18th, grew 6.0 percent year on year, marking a new record low.
Of course, this “low” is not the real “low.”
The government-announced economic growth rate for 2018 was 6.6 percent, but according to Professor Xiang Songzuo of Renmin University of China, the true growth rate for that year was only 1.67 percent.
If so, the true growth rate for the July-September quarter of this year must have fallen to the verge of 1 percent.
It is safe to say that the much-trumpeted high growth that lasted for several decades is almost over.
Until now, China’s economy somehow drove high growth through the expansion of exports and fixed-asset investment, while suffering from a desperate lack of consumption, with the personal consumption rate hovering around 37 percent.
However, as labor costs soared amid the inflation that began in 2010, China’s export products, which competed on cheapness, lost their competitiveness and no longer sold as they once had.
Then, as the U.S.-China trade war struck an additional blow, China’s foreign exports, which had once boasted annual growth of more than 25 percent, fell by as much as 3.2 percent in September of this year.
In the expression used within China, one of the “carriages” that had pulled high growth, namely exports, has completely stopped.
In the case of fixed-asset investment, another “carriage,” it cannot be said to have “stopped,” but compared with the past, it has weakened considerably.
Private real-estate investment and government public-works investment have all been overdone and have reached saturation, so the expansion of investment can only stall.
The growth rate of fixed-asset investment, which had been 25 to 30 percent every year until 2010, is now in the 5 percent range, and the old momentum is already gone.
With both exports and investment declining, economic growth might somehow continue if consumption were growing, but unfortunately, consumption, which had long been weak, has cooled further since last year.
Even if we take just one example, the automobile market, the nationwide number of new-car sales has declined year on year for fifteen consecutive months since July of last year.
The collapse of the car market has begun.
The “three carriages” that drive economic growth—the expansion of consumption, exports, and investment—have all gone bad, and therefore the economy has no way to grow.
Moreover, the contraction of exports and investment leads directly to rising unemployment and wage cuts, which invite a further cooling of consumption, and that further cooling of consumption brings about further decline in industry.
Amid this vicious cycle, a further fall in the Chinese economy is now unavoidable.
From around next year, it may certainly move into negative growth.
The expansion of social crisis accompanying economic decline is an even greater problem.
As the gap between rich and poor widens and public dissatisfaction grows, and as there are 260 million “floating population” workers, that is, migrant workers, a further economic slowdown will expand unemployment and lower the income level of low-income groups even further, making the expansion of social unrest unavoidable.
Depending on the movements of hundreds of millions of migrant workers who have lost their place to go, in other words, displaced masses, the stability of Chinese society may be overturned from its very foundations.
Furthermore, the Belt and Road Initiative as an international strategy promoted by China, and the military expansion strategy for dominating Asia, are all built on the foundation of economic growth.
If this foundation itself collapses, the Xi administration’s sole banner of “the great rejuvenation of the nation” will end as nothing more than a dream within a dream.
China, which had just held a dazzling ceremony on the 1st of this month to mark the 70th anniversary of the founding of the nation, is facing an economic and social crisis.
From now on, it is probably destined simply to tumble down the slope, and I would like to witness the final days of this giant empire.