Reading the Chinese Tea Leaves: Bitter Brew

A “ghost town” development in China

“It’s impossible to accept that I studied for so long, graduated from university and would start working full-time, just to make that little money,” 

‘Tian,’ who moved back in with her family in the Chinese coastal city of Zhuhai earlier this year.

The unraveling of China’s economy represents a downfall for a superpower, but is this good news for America? President Xi Jinping has purged his enemies from threatening positions, consolidated his hold on the nation, ended term limits on his presidency, crushed the powerful billionaires who rose to golden thrones and untold wealth, reprioritized patriotism as the guiding principle for everyone, built the second most powerful military on earth (with the largest navy), stomped on regional culture and political power from Muslim Uighurs in the west to heavily westernized Hong Kong, and expanded China’s military presence in the entire region. Xi is the new Mao Zedong. With a catch. Beijing, you have a problem… a really big problem.

Xi’s zero tolerance for COVID was so extreme that many shuttered businesses could not survive. His reversal of the People’s Republic’s one-child policy came too late, as the population is beginning to retreat from its pinnacle of almost 1.4 billion to an expected fall over the coming decades perhaps to 750 million. The fiery economic growth of the pre-pandemic era, where those golden-throners were creating massive new high-level job growth requiring people with college degrees, began to fizzle as Xi contained that monied class. The flood of investment in real estate, from entire new towns to massive commercial and residential buildings, slammed by the pandemic, showed an unexpected, significant reduction in demand. Big construction/property developers had a huge oversupply of structures… now empty… were facing insolvency. And all those companies that once hired ambitious college grads stopped hiring. Rental and credit defaults were rising fast.

Xi’s critics were circling, even as many faced an unpleasant “disappearance.” Xi even mandated that embarrassing economic statistics (like the unemployment rate among rising generations) no longer be reported. But everyone in China was aware of the decline. And Xi remains acutely aware of his failings. Circling the wagons, cozying up to Putin, and elevating China’s military-supported regional claims, from sea lanes to territorial claims to Taiwan, became a priority to distract his people from his mistakes and rally them to a patriotic call for support. See more in my September 11th An Angry Flailing China vs Highly Polarized United States blog. But these efforts also make Xi one of the most dangerous leaders on earth. That effort to distract could easily morph into a shooting war, even WWIII, with the West. And Xi understands the need to distract his people to maintain control.

Life and rising expectations in China have taken a serious hit. For those college educated younger Chinese workers, the frustration and slash to their hopes and dreams are particularly harsh. Many college-educated children were beginning to face this reality, some shifting to becoming “full-time children” again, others simply “lying flat.” Writing for the October 1st Los Angeles Times, Stephanie Yang and David Shen deep dive into this period of “readjustment” as it is impacting these rising generations: “China’s unemployment rate for 16- to 24-year-olds in urban areas reached a record high of 21.3% in June, before the government stopped publishing the monthly figures.

“As a result, younger generations are finding it harder to justify long workdays and personal sacrifice for the waning promise of a better life. Some are forgoing office jobs to try out different lifestyles, prioritizing quality of life over traditional success. Others are coping with the economic slowdown in other ways, such as buying lottery tickets or visiting temples to pray for employment.

“Beijing resident Ye Feng became a ‘full-time child’ three months ago after he quit his job in public relations at a financial firm. The 27-year-old had already started working fewer hours as the industry suffered and his interest dwindled. He was tired of the onerous social obligations, and had developed neck pain and stomach infections from the heavy workload.

“Now, he can’t imagine ever going back to an office job. He sometimes helps his mother liaise with merchants for the food court that she operates, but said he wants to use most of his time on rest, self-improvement and travel. Eventually, he might try his hand in entrepreneurship… ‘Originally I was making money to make money. Now I think of money as a tool to achieve my dreams,’ Ye said. ‘Money is important, but it’s not my whole life.’

“Online critics have decried ‘full-time children’ as a euphemism for freeloading off one’s parents, which has traditionally been known by another name, kenlao — literally translated as ‘gnawing on the elderly.’… ‘So-called ‘full-time children’ is just turning your normal duties into a job. If the day comes when your parents can’t provide your salary, will you still be willing to care for them?’ one Xiaohongshu user commented. ‘This is an excuse for good-for-nothing children. Only by adapting to society can you become a person of real value,’ another wrote… Others see the trend as an extension of tangping, or ‘lying flat,’ used to describe disillusioned youth choosing to give up on the rat race and do nothing…

“‘If it becomes a structural problem, then it will have a very important cost in terms of reduced productivity,’ said Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis, a French investment bank. ‘It may still end up creating a permanent effect because these youth working at home may actually no longer find any other job.’” The great Chinese experiment that lifted a billion people out of poverty in about three decades is hitting a wall. Their denigration of Democracy as a failed system of governance is coming back to haunt their leadership. While China may overtake the United States’ economy in a decade or two, that rise will only be momentary… and Xi knows that. The real question is how far a narcissistic autocrat is willing to go to preserve his legacy. What could possibly go wrong?

I’m Peter Dekom, and if Americans do not send a clear message to deter Xi’s desire to “distract and rally” – like ramping up support against Russia’s efforts in Ukraine – we just might find ourselves in the most expensive direct military conflict in the 21st century: US vs China.