It will disappoint China’s people and anger the rest of the world
gravest economic test since the most far-reaching of Deng Xiaoping’s reforms began in the 1990s. Last year the country achieved growth of 5%, but the pillars of its decades-long miracle are wobbling. Its famously industrious workforce is shrinking, history’s wildest property boom has turned to bust and the global system of free trade that China used to get richer is disintegrating.
The scope of this plan is breathtaking. We estimate annual investment in “new productive forces” has reached $1.6trn—a fifth of all investment and double what it was five years ago in nominal terms. This is equivalent to 43% of all business investment in America in 2023. Factory capacity in some industries could rise by over 75% by 2030. Some of this will be made by world-class firms keen to create value, but much will be prompted by subsidies and implicit or explicit state direction.
Another flaw is that weak domestic demand means some new production will have to be exported. The world has, regrettably, moved on from the free-trading 2000s—partly because of China’s own mercantilism. America will surely block advanced imports from China, or those made by Chinese firms elsewhere. Europe is in a panic about fleets of Chinese vehicles wiping out its carmakers. Chinese officials say they can redirect exports to the global south.
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