China’s Sprint for Tech Dominance Can’t Hide an Economy Full of Holes

Self-sufficiency push has made China a tougher competitor to the U.S., but it comes with enormous waste

By Brian Spegele of The WSJ. Excerpts: 

"Factory robots run by artificial intelligence churn out products that jobless college graduates cannot afford. State technology funds throw billions of dollars at money-losing startups even as the national debt surges to unprecedented levels."

"Beijing’s gains are coming at a steep cost, with the state’s heavy-handedness in directing investments wasting colossal amounts of money. The hundreds of billions of dollars China spends each year on domestic technology also eats away at the money for rural education, reinforcing the social safety net and other programs economists say are needed to put growth on a firmer footing."

"Of the 129 brands selling electric cars and plug-in hybrids in China as of last year, only 15 are expected to be financially viable by 2030"

"Home prices are down 17% since the pandemic"

"Per capita disposable income in cities is less than $700 a month, while in the countryside as many as several hundred million people subsist on just a few dollars each day."

"In Mianchi County . . . spending on science and technology rose nearly 50%, even as government revenue fell more than 10%."

"Yet some government workers aren’t getting paid."

"Government debts across China are estimated to have roughly doubled between 2019 and 2024, hitting as much as $23 trillion"

"productivity growth is slowing"

"state aid, such as cash subsidies, tax breaks and cheap credit to businesses, has reduced China’s overall GDP by as much as 2%, and cost around $800 billion in 2023"

"Throttling back state support for companies would allow the market to play a bigger role in more efficiently directing China’s money to where it is needed, she said." [IMF Managing Director Kristalina Georgieva]

"Provincial officials poured tens of billions of dollars into government-favored sectors. Much of it has gone to waste"

"tech investments and state subsidies are flowing to sectors that aren’t creating nearly enough jobs. One out of six young people in Chinese cities is out of work."