China’s economy is built upon a foundation of industrial espionage. Coming out of the Chinese Civil War, Mao Zedong preached a slogan of, “Catch up to Great Britain and beat the Americans!”
Because they were communists, the Americans wanted nothing to do with China. Communist China was isolated and alone on the world stage—save for its alliance with the Soviet Union just next door in Russia. For 20 years then on, Mao took his agrarian nation and pushed it into the next stage of industrial development.
When Mao’s China Stole from the Soviets
Mao did this through industrial espionage directed against the Soviets.
Moscow had tolerated this while Josef Stalin was in charge. Once Stalin died and was replaced by Nikita Khrushchev, however, relations between China and the Soviet Union soured. Khrushchev and Mao disliked each other personally.
Territorial disputes soon broke out. More than that, though, the Soviets were tired of the rampant industrial espionage that China was conducting on their purported friends in the Soviet Union.
The Sino-Soviet split occurred and almost ended in a major war between the two communist nations.
At that point, Mao pivoted, and reached out to the Americans who, at the time, were desperate to damage their great Cold War rival, the USSR, in the wake of America’s disastrous showing in the Vietnam War.
The Americans Become China’s Next Victim of Industrial Espionage
The Nixon Administration sensed the opportunity to break the communist alliance apart and took it.
From there, Jimmy Carter issued the Shanghai Communique of 1979, which recognized China’s Communist Party (CCP) as the official and only government of mainland China. Although, the English-translation of this document makes it clear that Taiwan, while part of China, is to have a separate, democratic system governing it.
After that, the opening to China was complete.
With the help of Wall Street, deindustrialization of the American heartland began in earnest during the Carter Administration and continued until present day. As America deindustrialized, China industrialized, and ultimately created the world’s largest middle-class while America’s middle-class contracted and struggled to survive.
The Americans who supported closer trade ties with China convinced many in Washington that trading with China would make them a friendlier, more democratic state over time.
America would benefit from cheap goods. China would get richer. America would then transition to developing the talent and capabilities necessary for leading the transition to the knowledge-based economy, leaving the rest of the world—including China—in the dust.
Sadly, the best laid plans rarely survive contact with reality.
China, unsurprisingly, did not simply intend on being the world’s permanent sweatshop. China planned on using the capabilities they garnered from the West and the money they made from selling their products to Western markets to fund a robust educational system for their next generation.
Beijing also desired to move up from simply being a giant industrial power to competing with the Americans for the top spot in the global knowledge-based economy.
China’s Rip-Off Economy is Struggling (But It Might Not Be Forever)
Today, China is not just an imitator in key technologies. They are an innovator as well. But it is important to understand that China basically cut corners to get to the position they now enjoy—the second-largest economy in the world, in GDP terms.
And because they copied or stole so much of the technologies they now have, the fundamentals undergirding China’s economy are mixed at best. That’s not to say that China is destined to fail.
It’s simply that China’s top-down model, while it certainly has allowed for the communist state to do in about 50 years what it took the West 250 years to do, suffers through drastic declines that could collapse the whole economy like a house-of-cards.
Moreover, China, a more than 4,000-year-old power, might ultimately be fine.
What is more likely to happen is, if the economic situation in China continues to decline, President Xi Jinping’s rule will be threatened more than the collapse of either China or the CCP.
After all, China’s long arc of history is replete with tales of the rise-and-fall of great dynasties (of which, some believe the CCP is merely one of many dynasties).
A Real Estate Crash Like No Other
In September 2021, China’s massive property market began a long-awaited correction. Some have speculated, though, that the correction was an attempt by Xi Jinping’s apparatchiks to stage-manage a transition from what the CCP deemed to be a “risky” real estate market.
Much of China’s large property market, mind you, was propped up by government policies since the heady days of the 2008 Recession when, to avoid a crash like what hit the American economy then, Beijing started building their infamous ghost cities to boost employment and help to mitigate against high property prices in the country.
Unlike the Americans, this interpretation goes, the Chinese refuse to allow for the risk in their property market to become so great that it collapses the entire economy, as happened in the United States in 2008.
Basically, Beijing’s political masters recognized that a bubble had formed in the property market, and they sought to pop it prematurely rather than let it mature and annihilate their economy as happened in the West.
If true, though, it is possible that the Chinese leadership engaged in a self-fulfilling prophecy. China’s rulers may have collapsed the most productive part of their economy to avoid the very collapse they triggered in the first place (if this interpretation of events is true).
What’s more, these events began on the heels of the Chinese government’s devastating “Zero COVID” policies that severely damaged China’s overall economy under the weight of draconian, forced lockdowns and other radical social distancing measures that’d have made California’s Democratic Party Governor Gavin Newsom blush.
Triggering a collapse of the lucrative property market, as the CCP is believed to have done in 2022, just as the country was trying to dig itself out of Xi Jinping’s “Zero COVID” policies, is not redirecting the funds that’d have been used to invest in the property market instead into China’s critically important tech sector, as was hoped.
It’s just immiserating a population already run down after years of “Zero COVID”.
Xi Jinping is being blamed for this failure. That’s why he’s spastically trying to redirect his populace into focusing on matters of nationalism and, quite possibly, war against China’s neighbors—anything other than the failing economy that Chinese government policies produced.
On the other hand, China experts in the West insist that the Chinese economic miracle is not only ending. They believe China is going through a Soviet-like collapse—and we don’t even fully see it.
This, too, seems to be an extreme interpretation of events in opaque China—at least for now.
Things are certainly dangerous for China’s economy now. People are feeling the burn as China’s economy still reels from the twin hits that were “Zero COVID” and the ongoing collapse of China’s massive property market.
But does that mean China’s economy is collapsing or that there is simply a correction in China’s overall market, just as what routinely happens here in the United States? Does this mean we can rest easy because the Chinese threat is going to dissipate over the next few years as their economic condition severely declines?
We can certainly hope.
What Hath a China Collapse Wrought?
Of course, a collapse of China’s political system as a result of its declining economic conditions will bring with it a set of serious problems for the West beyond whatever problems the current Chinese regime poses to the rest of the world.
And what comes after Xi Jinping, whether it be a new communist ruler or something else—or even warlord-style chaos as what befell China after the Qing Dynasty collapsed at the opening of the twentieth century—could be far more dangerous for China.
What we can be certain of is that China is going through some turbulent economic times. The more turbulent the situation becomes in China, the more likely that Xi will feel the pressure, and will be compelled to lash out at his neighbors—notably Taiwan.
The real question is whether China can achieve its goal of reunification.
An even better question to ask is if Xi Jinping truly believes he has a chance at achieving his goals in Taiwan. He might if the situation in China’s economy is as bad as Western observers claim. Certainly, there is a contraction occurring that Xi himself might not be able to weather, which makes his willingness to engage in risky behavior in regards to his neighbors higher than it normally would be.
Lastly, even if China didn’t win in a fight to take over Taiwan, the fact remains that Xi will still try to achieve his dream of capturing Taiwan, if only to misdirect his people from the failing economic conditions in China. And such a conflict would be hugely devastating to a world economy still reeling from the novel coronavirus that emanated from Wuhan, China, in 2020 and the Russo-Ukraine War that began in 2022.
I cannot speculate with certainty as to whether China’s economy is collapsing or not. What is clear is that a major correction is underway. A correction that might seriously threaten Xi’s iron grip on power.
Because of that, Xi is more likely to engage in destabilizing, risky actions, like attacking Taiwan, than he ordinarily would be. Americans must be ready for these dark days which may be around the corner.
A 19FortyFive Senior Editor, Brandon J. Weichert is a former Congressional staffer and geopolitical analyst who is a contributor at The Washington Times, as well as at the Asia Times. He is the author of Winning Space: How America Remains a Superpower (Republic Book Publishers), Biohacked: China’s Race to Control Life (Encounter Books), and The Shadow War: Iran’s Quest for Supremacy (July 23). Weichert occasionally serves as a Subject Matter Expert for various organizations, including the Department of Defense. He can be followed via Twitter @WeTheBrandon.