China’s economy is getting weaker and Xi Jinping has few domestic options to jump-start it. When Secretary of State Antony Blinken was finally granted an audience in Beijing over the weekend, let’s hope he used China’s dependence on Western business as leverage to achieve some benefit for the U.S. One potential area for exerting this leverage involves China’s extensive role in the trade of illicit drugs, including fentanyl.
Since the opening of China’s economy under Deng Xiaoping in 1978, growth has been a result of demographic vitality, massive public-works investment, a booming real-estate sector, a sustained foreign-trade surplus, and investment from the West in production facilities and associated technology transfer. A surge in public and private debt is the legacy of the investment boom.
By the time of the Covid crisis, these had largely eroded or reversed. Today, Beijing badly needs Western investment to avoid further decline. Government finances have weakened amid the real-estate crisis, making big-ticket public-works projects harder to finance domestically. Chinese exports fell by 15% in the past year, and major markets for Chinese goods are in or near recession. Youth unemployment in China is about 20%, and consumer finances have been undermined by falling real-estate returns.