Why Xi's Chinese miracle was just a mirage and how the big economic bubble may go bust
Xi Jinping's ambitious reform agenda, now seems to be more of a mirage than a miracle, as reported by Reuters. A decade ago, these reforms aimed to steer China towards a Western-style free-market economy driven by services and consumption by 2020.
However, the majority of these reforms failed to materialize, leaving the Chinese economy heavily reliant on outdated policies.
This persistent reliance on older economic models has not only exacerbated China's substantial debt burden but also worsened issues related to industrial overcapacity. As a result, concerns and skepticism about the nation's economic future have gained prominence.
Some experts predict a slow drift towards a stagnation scenario, similar to Japan's experience, while others warn of a more severe economic downturn.
William Hurst, Chong Hua Professor of Chinese Development at the University of Cambridge, told Reuters, «Things always fail slowly until they suddenly break,» highlighting the significant risk of a financial crisis looming over China in the near term. «Eventually there's going to have to be a reckoning,» Hurst said.
The Bursting Bubble: Why and How
The bursting of China's economic bubble can be attributed to a complex interplay of factors that have accumulated over several decades.
China's rapid transformation from a Maoist planned economy in the 1980s into an industrial powerhouse involved heavy investments in factories and infrastructure. However, by the time the global financial crisis struck in 2008-09, China had largely fulfilled its investment requirements relative to its level of development.
While China experienced substantial nominal economic growth, this expansion was accompanied by a massive increase in overall debt, which expanded
