China’s economic landscape is a stark contrast of innovation and stagnation, a reality that cannot be ignored. While the narrative often focuses on China’s impressive technological advancements, the underlying structural weaknesses of its economy reveal a more troubling picture. Rising debt, an aging population, a real estate market in freefall, and soaring youth unemployment signal a crisis that is far from superficial. As some experts contend, China’s economy may have peaked, and “involution,” or wasted production, could lead to an inevitable downward spiral. If these trends persist, nearly a billion people could find themselves trapped in low-income livelihoods, a fate that is as unjust as it is preventable.
The duality of China’s story—brilliant technological achievements on one hand and dire economic stagnation on the other—demands a critical analysis that connects these dots. Proponents of China’s innovation prowess often clash with those who highlight its looming debt and demographic challenges. However, a nuanced understanding reveals that these seemingly disparate elements are intertwined. China is not merely a “fat tech dragon” in need of a diet but has now become a “slow tech dragon,” burdened by misallocated resources and stagnant income growth.
The paradox of China’s tech success is evident in its remarkable rise in the Global Innovation Index—from 43rd to 10th place in just over a decade. China’s investment in research and development has surged 475 percent since 2007, and its scientists are now publishing more papers than their U.S. counterparts. Yet, despite these statistics, this high-tech push has not translated into sustainable economic growth. For over 15 years, China has witnessed a steady decline in growth rates and an alarming accumulation of debt, with the tech sector contributing to this downward trend rather than alleviating it.
China’s ambitious “Made in China 2025” initiative aimed to catapult its industries into the global spotlight, and while it has indeed resulted in significant advancements, the strategy has also led to gross overinvestment in numerous technologies. The market is saturated with electric vehicle manufacturers and humanoid robot startups, yet the reality is that many of these firms lack the structural integrity needed to survive in a competitive market. Local governments, eager to promote growth, have provided easy access to funding, allowing underperforming enterprises to persist long past their expiration dates. This soft budget constraint has exacerbated the problem, leading to a continual cycle of waste and inefficiency.
Moreover, the high-tech sector’s growth has not translated into broad-based economic benefits. While advancements in areas like electric vehicles and renewable energy technologies are commendable, they are capital-intensive industries that do not generate sufficient employment to uplift the vast number of undereducated workers. China’s rural populations, often left behind in the race for innovation, are facing unprecedented challenges as they become increasingly marginalized in an economy that demands higher skill levels than they possess.
The education gap is a ticking time bomb. With around 60 percent of China’s labor force lacking even a high school education, the potential for upward mobility diminishes drastically. This is not merely an issue of personal failure; it represents a systemic inequity that must be addressed. The millions of Chinese working for less than $10 a day in small towns and villages are not just statistics; they reflect the human cost of an economy that prioritizes technology over social welfare.
The consequences of this inequity are far-reaching. As the manufacturing sector declines and the real estate bubble bursts, millions of rural workers are being pushed into informal employment, often facing abysmal wages and working conditions. The gig economy, while touted as an opportunity, has instead become a trap for many, leaving workers without job security or benefits. This erosion of the labor force’s rights is a grave injustice that must be confronted.
The disconnect between China’s technological ambitions and the realities faced by its populace creates an atmosphere of uncertainty and pessimism. Surveys indicate a significant decline in optimism regarding economic prospects, with many attributing their struggles not to personal shortcomings but to systemic issues. The once-rosy picture of economic advancement has darkened, revealing a population increasingly aware of the disparities that define their lives.
China’s leadership faces a critical choice: continue down the path of prioritizing technological innovation at the expense of social welfare or pivot towards inclusive policies that elevate the entire population. Investments in unemployment insurance for rural workers, easing residency restrictions, and enhancing access to quality education and healthcare are not merely economic strategies; they represent a moral imperative to uplift the most vulnerable.
Without these reforms, China risks cementing its status as a slow tech dragon, with all the social and economic consequences that entails. A failure to address the pressing needs of millions could not only stifle domestic consumption and growth but also exacerbate global tensions as other nations react to China’s inequities.
Ultimately, the path forward lies in balancing technological advancement with a commitment to social justice and equality. By fostering a more inclusive economy, China can not only enhance its own prospects but also contribute to a more equitable global landscape. The stakes are high, and the time for decisive action is now.
This article highlights the importance of Mirage and Stagnation.
