Part 2: [China in a Hypothetical Scenario] The Overture to a Silent Economic Collapse — The Twilight of a Great Power (Late 2020s to Early 2030s)
Introduction: The End of the Economic Growth Myth
Once, the world was obsessed with China's economic growth. The sight of skyscrapers rising and cutting-edge technologies being created one after another was called the "Chinese Miracle." However, beneath that brilliant surface, how many people realized that the sand in the giant hourglass had begun to fall faster than expected?
Until just a few years ago, no one doubted that future. However, from the late 2020s, economic problems that manifested like an avalanche turned the "miracle" into an illusion in just a few years, dragging the great power into a deep twilight.
The "economic dysfunction" experienced by the Soviet Union in Part 1 was caused by the rigid system of a planned economy. However, while China adopted a market economy, it harbored new "Achilles' heels" in the form of finance and information control. We will approach the core of that.
This economic twilight was the beginning of a silent death experienced by a great power, and it was merely the calm before the coming storm.
1. The Bursting of the Real Estate Bubble and Financial Crisis: The Collapse of the House of Cards
The "real estate" sector, which had been driving the Chinese economy, was truly a house of cards.
The Beginning of the End: A Chain of Bankruptcies
In the late 2020s, the bankruptcies of major real estate companies, represented by the Evergrande Group, did not stop, and they cascaded down to small and medium-sized developers. Countless construction sites were abandoned, and "lanweilou" (unfinished buildings) with exposed steel frames overflowed in cities and rural areas. This was not just a suspension of construction; it created a tremendous tragedy where many people lost the homes they were living in while still paying off their mortgages.
The Bankruptcy of Local Governments and the Paralysis of the Financial System
Local governments lost their main source of revenue—real estate sales—and their finances completely collapsed. Salaries for local civil servants were delayed for months, and operations at local hospitals and schools began to falter. Furthermore, the massive debts of these local governments and real estate companies were deeply embedded in state-owned and local banks.
As a result, banks were saddled with massive non-performing loans, and lending to small and medium-sized enterprises was halted. Eventually, even some government-affiliated banks began restricting withdrawals, and many citizens faced the terror of losing all the assets they had built up. A situation that could be called a "Chinese version of the Lehman Shock" occurred in various places, and it became common to see crowds rushing to ATMs to withdraw their deposits, only to clash with the police regulating them. The despair of those who fell into a "double bind"—left with mortgages for unfinished homes and unable to withdraw their savings—only deepened.
Comparison with the Soviet Union: Just as the Soviet Union self-destructed due to the rigidity of its planned economy, China, despite adopting a market economy, found that its distorted growth model of finance and real estate became its Achilles' heel, triggering an economic collapse.
2. Paralysis of the Industrial Structure and the Birth of a "Lost Generation": The Limits of the Growth Model
Just as the Soviet Union lost its flexibility due to an overemphasis on heavy industry, China's old growth model became obsolete, and young people began to lose hope.
Deepening Decoupling and Industrial Hollowing
The deterioration of relations with the U.S. and "decoupling" had reached a point of no return. In particular, the tech war between the U.S. and China over semiconductors, AI, and advanced technology intensified, and the U.S. semiconductor embargo dealt a fatal blow to China's entire smartphone, AI, and automotive industries. Technology development, which was supposed to be the world's most advanced, stagnated, and many factories ceased operations. Japanese and European companies also accelerated their withdrawal from China, and the industrial zones along the coast lost their former vitality, with massive factory complexes standing like ruins.
The Worst Unemployment Rate in History and the Collapse of Social Security
The paralysis of the economy created large-scale layoffs and unemployment. In particular, many of the large numbers of university and graduate students who graduated each year could not find jobs, and the youth unemployment rate reached unprecedented levels. If you had graduated from university but could not find any work at all, what would you do? They transformed from lethargic youths called the "lying flat generation" into "runaway generation," attempting to escape to Vietnam, Thailand, the Middle East, and even South American countries using illegal means.
Those who could not leave the country were "sent down" from urban areas to rural areas, and poverty expanded. Social friction also arose in various places as urban youth were forced to work in rural areas.
Rapid aging and economic stagnation are hitting the nation's social security system head-on. Pension funds are being depleted, pension payments to the elderly are stalling, and health insurance is falling into dysfunction. What if the money you worked for years to save suddenly became inaccessible one day? The tragedy of people unable to receive medical care while supporting sick family members has become a common sight.
Comparison with the Soviet Union: Just as the Soviet Union exhausted its national strength in the invasion of Afghanistan and its citizens' lives became impoverished, China has lost the illusion of economic prosperity and, with it, the hearts of its people. International decoupling, much like the Soviet invasion of Afghanistan, has begun to erode the nation economically and socially.
3. The Loss of the Communist Party's Legitimacy: Shaking the Foundations of Governance
Improving the lives of citizens through economic growth was the greatest justification for the Chinese Communist Party to maintain its 'one-party dictatorship.' However, when that pillar collapsed, public trust in the Party plummeted.
The Failure of 'Common Prosperity' and Amplifying Public Dissatisfaction
The 'Common Prosperity' policy promoted by the Xi Jinping leadership initially drew applause from the public by strengthening asset collection from the wealthy and tightening regulations on major IT companies. However, it chilled the entire economy and, in the end, brought almost no benefits to the poor. Public dissatisfaction with the corruption of Party officials and the privileged class remains deep-seated, and the perception has spread that the gap between rich and poor is not being resolved, but rather widening.
The Collapse of the Dream of 'Great Rejuvenation' and Doubts About the Leadership
The slogan of the 'Great Rejuvenation of the Chinese Nation' was nothing more than an empty sound in the face of economic collapse and the reality of hardship. Patriotism is no longer transforming into loyalty to the Party, but into an outlet for anger toward the government. Regarding responsibility for the economic chaos, criticism and dissatisfaction with the Xi Jinping leadership have begun to be voiced openly within the Party, especially among retired elders and reform-minded officials. The dream of 'Great Rejuvenation' spoken of by official media no longer resonates with the public; instead, a fundamental doubt—'Does the leadership really understand the lives of the people?'—has spread quietly but surely.
Comparison with the Soviet Union: Just as the Soviet Union lost the trust of its people due to the hollowing out of communist ideology, bureaucracy, and corruption, China has lost its greatest justification—economic success—and the foundations of its governance have begun to shake significantly.
Summary: The Countdown to Collapse Has Begun
Just as the Soviet Union faced an 'Era of Stagnation' and its economic plight eventually led to the end of the state, China has also reached the limits of its economic growth model and is facing serious structural challenges. The collapse of the real estate bubble, financial crises, mass unemployment, and the breakdown of social security are not just economic problems; they have become a fatal blow that shakes the very foundation of the Communist Party's governing legitimacy.
This economic twilight is the beginning of a silent death experienced by a great power, and it is merely the calm before the coming storm. With ballooning domestic economic stagnation and wavering governing legitimacy, why would the Chinese leadership, facing a domestic situation that has truly become a 'powder keg,' push forward into a military adventure like a 'Taiwan contingency' that could invite further ruin?
In the next Part 3, we will detail the background of that shocking decision and the beginning of the war that will shake the world. Please look forward to it.
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