China’s economy is in a grim place these days, far from the past when many journalists and politicians praised Beijing’s policies and spoke of that economy’s imminent dominance. Beijing just released a 5 percent real growth target for 2024, the same pace as last year. Much of the forecasting community is rightfully skeptical of whether that kind of growth is possible. A lot of skepticism remains over last year’s figure. Whether China hits the target or not hardly makes a difference. The important point is that 5 percent is only about half the growth pace averaged in past years. Something clearly has gone wrong.

Very little in Chinese economics has looked good since the COVID-19 pandemic of 2020. The nation’s population and, critically, its labor force are shrinking. A property crisis continues to weigh on building, home buying, and real estate values, and hence on the consumer as well as business confidence. China’s once-exuberant consumers remain reluctant to spend. Private businesses have reduced their levels of investment, expansion, and hiring. A huge overhang of questionable debt—from defunct developers as well as local governments that have long depended for revenues on real estate development—has hamstrung the ability of Chinese finance to support economic growth. Meanwhile, Western and Japanese businesses continue to diversify supply chains away from China, slowing the growth of buying and the flow of investment money into the country. Accordingly, Chinese exports—the economy’s mainstay—have suffered, and though shipments rose in the opening months of 2024, they remain anemic compared with past years. Meanwhile, governments in Washington, Brussels, and Tokyo have replaced their former support for Chinese development with open hostility.

In this sorry picture, there is plenty of blame to go around. China’s property developers were less than prudent in their use of debt and the locations for some of their projects. If American, European, and Japanese businesses had shown good judgment, they would never have created such a heavy dependence on China in the first place and would not have had to engineer a withdrawal. Washington, Brussels, and Tokyo should have known from the start that once China achieved sufficient development, Beijing would pursue its interests more aggressively. However, for all the mistakes of others, most of the blame for China’s problems belongs to the nation’s leadership in Beijing.

Take China’s demographic problem. Birth rates have been so low for so long that China lacks a sufficient flow of young people into the workforce to replace the large numbers now retiring.........

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