“Xiconomics” will prevail over the current issues facing China. These will be painted as transitory problems which will be overcome as the middle kingdom emerges as the ordained superpower on earth.

As Xi Jinping ascends new political heights, the Chinese economy is wracked by his zero Covid policy, real estate crisis, cash-strapped local governments, big tech emasculation, supply chain relocation and global decoupling. Geopolitical and economic headwinds from the Ukraine war and deteriorating relations with the USA, EU nations, India, Japan, South Korea and Australia compound China’s woes. Military assertions against India, Taiwan, Xinjiang and Hong Kong and in the South China Sea induce global distrust of China. An unprecedented drought and the spectre of climate change casts a pall over China’s future. The days of heady investment-led economic growth crackling through debt-fuelled infrastructure, high-priced property, high-speed trains, gleaming highways, buzzing hi tech and smoothly purring manufacturing supply chains are over.

Michael Pettis in his illuminating article ‘How China Trapped Itself’ outlines three options for China’s salvation. The first option is to continue with rapid, debt-fuelled investment, by reviving the property sector and/or increasing spending on infrastructure. However this is what brought about the current situation. The second option outlined is to rebalance the economy from investment to consumption. As China ages rapidly , it refuses to consume due to decreasing productivity, a shrinking labour force, joblessness and decreasing wages. The third option is to allow growth rates to fall sharply and get absorbed by the government sector, keeping the people from being affected. Politically, this will be anathema to the CCP. The economy is destined to stagnate or decline as there are no good options for China.

If a hairline fracture exists between the surrealism of Xiconomics and the economic reality, the regression of the “people” part of the PRC portends a multiple fracture. China is experiencing the fastest demographic decline in human history with falling birth rates, rapid ageing and decreasing working population as a result of its half-a-century-old one-child policy. This irreversible phenomenon indicates that China’s population will fall below 800 million by 2100. What compounds the problem is the growing disillusionment of the youth. China’s youth unemployment has remained stubbornly high at about 20 per cent. College graduates face an uncertain future with fading opportunities. Curiously, fresh college graduates, overseas returnees and workers retrenched due to factory or corporate closures are all competing for the same jobs with reduced pay in a shrinking pie. For the youth to care for aged parents while raising their own families would be a frighteningly immense burden amid the rising cost of living and decreasing wages.

Youth disillusionment came to the fore last year, when “tang ping” or “lying flat”, became a social protest movement and went mainstream in China. “Tang ping” meant just doing enough to get by. It was a movement against the unceasing work culture in China. The new buzz phrase is “bailan” or “let it rot”. “Bailan” is attitudinally giving up on a deteriorating situation. It is gaining popularity among the Chinese youth . “Tang ping” is harmless and denotes doing the bare minimum. “Bailan”, on the other hand, indicates people giving up or willing to accept far fewer outcomes. It is an exhausted mindset which clearly stems from the overly competitive communist mentality for which it is the norm to continuously try to prove oneself to be the best. The progression from a neutral “tang ping” to a corrosive “bailan” is not yet universal but widespread enough to indicate pessimism and disillusionment in China’s youth.

Interestingly, about 10-11 million youth have graduated annually from colleges in the past three years. In the same period, the number of new-borns has also been around 10-11 million annually. Both figures will decline at the same rate in years to come. It represents a huge fall in human capital. It took two generations of reform to build present-day China. It will take China less than one generation to destroy itself through Xiconomics.