This interesting article explains the long-term crisis the masses face in rural China in some depth. The crisis includes pollution and warming weather, and although the incidents of mass resistance are disconnected, there are a growing number of them.
https://andreaferrario1.substack.com/p/ ... irect=true The translation:
Rural China: The silent crisis of emptied villages
Between forced expropriations and unsustainable local debts, Chinese campaigns are experiencing a violent transformation. The earth, the last resort for millions of people, is disappearing
Andrea Ferrario
Feb 12, 2026
In November 2024, China's Ministry of Rural Affairs issued a statement that, behind its bureaucratic wording, allowed a significant political admission to emerge. The government said the government must “prevent on a large scale” the phenomenon of migrant workers “remaining stranded” in their home villages after the Lunar New Year holidays. The choice of the verb “prevent” suggests that Beijing considers the return to the countryside a problem of social stability to be contained, while the expression “they remain blocked” implies that these workers have decided not to return by choice to them. The communique came as the country prepared for the large annual migration for the holidays, when hundreds of millions of people cross China to reunite with families. That year, however, the authorities feared that many would no longer leave, restrained by the lack of work in the cities and the impossibility of keeping themselves in the villages.
When writing about China, the focus is almost always on the urban, modern and technological dimension. The megalopolis of the coast, the skyscrapers of Shanghai and Shenzhen, digital innovation and expansion of the middle class constitute the dominant narrative. But rural China, that of the villages of the interior marked by difficult economic conditions, is still the daily reality of hundreds of millions of people and even in very recent times, it has been one of the main places of resistance and protest against the central power. The Chinese campaigns are not only a legacy of the past destined to disappear with modernization, but a space in which the contradictions of the country’s economic and political system emerge with particular force. To ignore this dimension is not to understand where the deepest tensions of contemporary Chinese society are concentrated.
The phenomenon of rural migrants returning to villages definitively marks a break from the dynamics of the last forty years. Since 1980, the percentage of the urban population has increased from 10% to over 60%. This huge demographic transformation has been fueled by the continuous flow of farmers to coastal factories, construction sites and urban services. About 300 million people today make up the migrant workforce, moving between countryside and cities following the economic cycles. Until a few years ago this mobility functioned as a system relief valve. When the economy slowed, workers temporarily returned to the villages, where they could grow small plots of land waiting for the situation to improve. The land guaranteed a minimum safety net that allowed the system to unload on the villages the social costs of crises. This mechanism, however, has jammed. The proportion of migrant workers crossing provincial borders to seek employment fell from 47 per cent in 2014 to 38% in 2024, signaling a geographical contraction in job opportunities and a growing difficulty in finding employment away from home.
The crucial difference from the 2008 global financial crisis is that today the campaign can no longer function as a social shock absorber. Back then less than 10% of rural households had surrendered the rights of land use to others. Today that percentage has risen to 40%. Hundreds of thousands of households have rented or sold the rights to their plots, often out of economic necessity or because they have spent decades away from villages losing their agricultural skills. The result is that those who return find no more land to cultivate. At the same time, the construction sector, which absorbed huge amounts of low-skilled labour, entered a structural crisis with the collapse of the housing market. Manufacturing is relocating to countries with lower costs or replacing workers with automation. Some construction workers interviewed during the return trip to the villages of Henan said they saw their monthly income fall from 9,000 to 5,000 yuan in a few years, while others admitted to having left a month in advance of the holidays simply because “there were no more jobs”. Hengyang County, in the southern province of Hunan, recorded the return of 183,000 workers for last year's holidays, and over 40,000 of them are no longer broken down.
The central government has sought to mitigate the problem by promoting industrial development in the average inner cities. The goal is to attract a portion of manufacturing production away from expensive coastal provinces, creating jobs in the areas where migrants come from. This strategy, however, shows obvious limits. Wages in the innermost cities remain much lower than those of coastal metropolises and competition for available seats is very high. In addition, a generational shift in the priorities of younger workers is emerging. Many prefer to stay close to families even at the cost of earning less, rejecting the life model of parents who have spent decades separated from their children. This phenomenon worries state planners, who have built Chinese economic growth precisely on the availability of large masses of workers willing to move anywhere for very low wages. The fact that young people are “taking root” in places with fewer economic opportunities represents a difficulty for a system that has always relied on labour mobility as an instrument of productive flexibility.
Life in the villages
Those who return find a reality that in official statistics appears as a managed demographic transition, while on the territory it presents itself as a rapid social breakdown. In 2000 the Chinese rural population amounted to 807 million people, or 64% of the total. Today that figure has fallen to 465 million, 33% of the population. Over 340 million people have moved from the countryside to cities over a quarter of a century. This exodus left behind emptied villages, in which the traditional social structure dissolved without anything emerging that could replace it. The elderly left in rural areas survive with monthly pensions of 169 yuan, about 22 euros, while public services have been progressively reduced. The village elementary schools have closed, forcing children to travel every day for long kilometers to the provincial cities or to live on school campuses. Entire villages remain without children, except during the holidays, when the children of migrants return briefly before leaving with their parents. The demographic vacuum is combined with environmental degradation and the almost total absence of health and social care, creating living conditions that in many cases have worsened compared to those of thirty years ago.
The collapse of public services in rural areas proceeds along with economic disruption and environmental deterioration. In many villages the collection of waste is now irregular or absent, with streams transformed into drains and garbage accumulations that push some families to burn the waste or to throw them directly into the rivers. At the same time plant diseases are eliminating crops that for years had guaranteed a minimal source of income, further reducing the chances of local livelihood. In this context, the crisis of winter warming in Hebei is also part, an example of a situation that also affects numerous other provinces. After the obligation introduced in 2017 to replace coal with natural gas, initially supported by public subsidies, funding was progressively eliminated, also due to the growing debt of local administrations and the collapse of revenue related to the real estate sector. The increase in energy costs has made gas difficult for many rural households to sustain, forcing many of them to return to traditional systems despite the bans. The partially reintroduced subsidies in 2025 had a limited impact, leaving the underlying problem unresolved: the difficulty of supporting essential services in a context of economic crisis and increasingly reduced public resources.
The historical roots of discrimination
These conditions are not the result of a temporarily unfavourable economic situation. The campaign crisis has its roots in a system of institutionalized discrimination deliberately built after 1949 and never dismantled. The hukou system, the register of residence that divides the Chinese population into rural and non-rural citizens, has created two categories of people with very different rights. State resources have been concentrated in cities, while the countryside has been treated as labour reserves to support urban industrialization. This administrative system has produced such a profound social stratification that it still influences access to education, health, pensions and even the physical mobility of people. Rural residents have been transformed into second-tier citizens through a legal mechanism that has made discrimination a structural part of the state organization. The persistence of this system explains why the inequalities between urban and countryside continue to expand despite decades of overall economic growth.
In 2000 a local Communist Party official had tried to bring this reality to the attention of the central government. Li Changping, secretary of the party committee of a rural constituency of the Hubei, had written a letter to Premier Zhu Rongji denouncing the tax burden and conditions of sharp disadvantage imposed on rural families. The text contributed to the debate on “three rural problems” and preceded the abolition of the agricultural tax in 2005, but Li was then pushed to abandon the political career and public confrontation on structural discrimination against the countryside was progressively reduced, while the hukou system remained largely unchanged. What has changed in the following twenty-five years is mainly the demographic composition: the rural population has gone from 807 million to 465 million, but discrimination against those who maintain rural resident status has remained essentially intact. Physical mobility has increased with hundreds of millions of people moving to cities, but the peasant origin continues to function as a lasting social stigma. The term “phoenix man”, used in a derogatory sense to refer to a man of rural origin who through study and work has established himself in the city, is still widespread in everyday language and recalls the idea that the peasant origin leaves social traces difficult to erase. In 2021 a rural high school student, during a public discourse gone viral online, called himself “a country pig determined to devour the cabbages of the big city,” a metaphor that shows how deeply many young people have internalized this social hierarchy.
The expression of this generational trauma has found in recent years an unexpected outlet in rap music published on video platforms such as Bilibili. Two songs in particular have reached millions of views and have transformed the comment sections into real venting spaces, where young people of rural origin, from millennials to Gen Z, tell direct experiences of discrimination and alienation. The texts describe declining villages, heavily polluted environments, the desire to leave the countryside to move to cities and frustration with social barriers that continue to separate those born in the countryside from those born in the city. One phrase in particular struck hundreds of thousands of listeners for its ability to condense a widespread sentiment: “I don’t love this place, I was just born there.” Young people who today vent in the comments under these music videos probably don’t know that twenty-five years ago there had been a time when the reality of the campaigns had emerged in the public debate and a structural change seemed possible. Li Changping had described that truth to the premier, but few or had really listened. The public confrontation has progressively died down, the reforms have not come and the pain he had described continues to re-emerge in the songs of a generation that has no direct memory of that failed attempt. The persistence of this trauma a quarter-century long shows that the problem is not related to temporary economic stages, but is rooted in deliberate political choices that no Chinese government has ever really tried to overcome.
Protests and resistances
The pain that emerges in rap songs does not remain confined to the comments sections of digital platforms. In Chinese campaigns, widespread insubordination is taking shape that manifests itself both through open protests and through forms of passive resistance. Data collected in 2024 by independent observers monitoring dissent in China show that up to November of that year 661 rural protests had occurred, an increase of 70 per cent from the entire previous year. This growth cannot be traced back to a single triggering event or coordinated mobilization. Instead, these are hundreds of apparently disconnected local episodes, but united by the same underlying causes. Most of the protests concern expropriation of agricultural land by local authorities for building projects, with compensation deemed insufficient by the inhabitants. In a context where urban unemployment drives many workers to return to villages, land is the last available protection network. Losing even this resource means slipping into extreme poverty without real possibilities for livelihood.
The incidents recorded in recent months show an increase in conflict. In the province of Hainan, villagers attempted to prevent the demolition of a small local Taoist temple by surrounding the building and throwing handfuls of rice at the riot policemen, according to an ancient ritual to drive away evil. The temple was demolished. In Hunan province dozens of people surrounded uniformed officials to protest the expropriation of mulberry-grown land that a mining company wanted to turn into a limestone quarry. Two women knelt in front of the officers performing the kowtow, the traditional gesture with which justice is sought. In Guizhou province tensions continued for days when authorities imposed mandatory cremation of the deceased in place of traditional burial. A video released online showed villagers forcing local officials to get on their knees. These incidents remain geographically isolated and are rapidly repressed by security forces, but their oil-spotted multiplication signals a growing insufference to a system in which citizens have no guarantee of justice.
The dynamic that fuels the protests is both brutal and evident. Chinese local governments are burdened with debts accumulated over decades of infrastructure investment financed with land-backed loans. With the collapse of the housing market this source of revenue has reduced dramatically, leaving many local administrations in difficulty in paying salaries to civil servants and maintaining essential services. The expropriation of rural land offers an immediate solution because, although the land has lost much of their commercial value, they can still be used as collateral to get new loans. The local authorities then end up seizing agricultural land to support the administrative machine. The inhabitants live these expropriations as something that deprives them of the only resource left. The compensations offered are often based on arbitrary assessments and are insufficient to allow households to rebuild an equivalent source of income elsewhere. The result is a spiral in which local governments must expropriate increasing amounts of land to sustain ever higher debts, while the rural population is being progressively impoverished to the point of no longer having resources to rely on.
The growing presence in the villages of migrant workers returning from the cities is changing the nature of rural protests. Those who have spent years or decades in urban settings have developed different expectations than generations who have never moved from the countryside. He has a greater awareness of his formal rights, even if these rights remain largely theoretical. He noted how collective claims work in urban industrial settings and shows less deference to local officials. Above all, he is less willing to passively accept decisions imposed from above. Some analysts have described these returning migrants as carriers of “urban expectations” and “political awareness,” elements that would make rural communities more unstable and more exposed to sudden tensions. This interpretation captures the phenomenon well, although it is then often used to justify a strengthening of control measures. The resistance, however, is not expressed only through open protests. There is also a widespread form of daily insubordination. Farmers continue to burn stubble in the fields despite fines of between 500 and 2000 yuan, because there are no viable alternatives to freeing the land. Many households have returned to using solid fuels for heating while ignoring the bans, because natural gas is too expensive. This passive resistance is less visible than the protests, but it also affects state authority, showing how central government policies are often bypassed at the local level when they are difficult to enforce.
The authorities' response oscillates between attempts at preventive mediation and direct repression. In September 2024, the government set up 2,800 county-level mediation centers equipped with social workers, legal counselors and even psychologists tasked with defusing conflicts before they publicly explode. The very existence of this social control infrastructure reveals that central authorities consider rural tensions a serious threat that requires significant investment. Last month the Hebei authorities restored some natural gas subsidies under pressure from warming-related protests, but the extent of the aid remained modest and left thousands of households still in trouble. These marginal concessions mainly serve to prevent local situations from degenerating into open revolts, but without addressing the structural causes of the crisis. The protests themselves do not pose an immediate threat to the central government, not least because protesters tend to target anger against local officials rather than against Beijing, still remaining at a time when it merely attributes responsibilities to executors instead of top brass. However observers note that officials from county and local constituencies appear increasingly "overwhelmed" by the amount and frequency of tensions they have to handle. The Chinese rural crisis is not cyclical. It is the product of deliberate policy choices stratified over the course of seventy years that have created a system of institutionalized inequalities. Between unsustainable local debts, privatisation of essential services and structural economic slowdown, Chinese campaigns are undergoing a violent transformation devoid of any protection network. The land remains for rural dwellers the last bulwark between survival and absolute despair, while local governments continue to dispossess it to buy time in a system on the brink of collapse.
China
Re: China
More from Andrea Ferrario [translated from the Italian]:
**China: the state that devours itself**
Chinese local governments are going through the worst fiscal crisis since the founding of the Popular Republic. Exhausted the model based on the sale of land to real estate developers, the provincial and municipal administrations have set out on a path that risks compromising the very foundations of China’s economic growth. An analysis published by the Jamestown Foundation [link to full document is below], with an impressive module of documented cases, how local public power is transforming from a development engine into a predatory device capable of seizing assets from private companies in other provinces, auctioning essential public services for the next thirty years and manufacture non-existent assets to stay afloat.
For twenty years the fiscal pact based on the Chinese local administration has worked according to a relatively simple logic. Local governments sold land use rights to real estate developers, and the proceeds from those assignments often covered over 40% of the revenue, funding infrastructure, wages, and debt service. The collapse of the real estate bubble that began in 2021 has rendered that model obsolete. Revenue from residential land sales plunged 65% in 2025 from the peak of 2020, and the consequences have quickly spread from budget abstracts to the reality of daily life. In Guizhou Province and Henan, teachers have reported cancellation of bonuses and months delays in paying basic wages, while in Zhejiang, a traditional fiscal stronghold, officials have suffered annual cuts ranging from 50,000 to 150,000 yuan. In Shandong, district officials receive only 70% of the salary, often late. The entire structure of local public spending, which in China covers about 85% of the overall public spending (pensions, healthcare, unemployment benefits included), is under unprecedented pressure. Salary cuts and delays in payments represent the first level of the crisis, that of internal austerity in the state system. The Jamestown Foundation analysis, however, focuses on what comes next, namely when cutting spending is no longer enough and administrations begin to extract wealth from the surrounding economic environment.
The most widespread form of this extraction is the explosion of "non-tax" incomes, i.e. fines, confiscations and retroactive audits. Some municipalities under heavy debt pressure have recorded increases of more than 100% year on year for these reports. The most aggressive practice is the so-called "offshore fishing", in which police forces of domestic jurisdictions in fiscal difficulty conduct operations in the richest coastal areas, seizing property of private companies and withholding a percentage of confiscated funds. The landmark case is Archealth, a Guangdong healthcare company whose IPO was blown up by an operation of 1,600 agents sent from Henan. The judiciary, in theory the counterweight, has in many cases turned into an accomplice. In a 2025, a Shanxi court has frozen 19.3 million yuan of assets from a Shanghai-based valve manufacturer that had no business relations in the province, simply to secure liquidity to the local jurisdiction. At the same time, retroactive audit campaigns have begun to treat past entrepreneurial success as a savings account at the disposal of the current tax, with tax claims arrears up to thirty years ago.
When direct extraction proves to be insufficient, local governments resort to monetization of the future, auctioning 20-year or 30-year concession rights on essential public services. Funeral homes in Rongjiang County in Guizhou were sold for 127 million yuan, an amount almost equivalent to the quarter's entire fiscal revenue. In Zhuhai, Guangdong, the management rights of nearly 24,000 street parking lots have been handed over for 730 million yuan over a span of 20 years. Logic reaches its extreme when auctioned good becomes purely theoretical, as in the case of Pingyin County in Shandong, where the 30-year rights on the "low-altitude economy" (drones and airspace management, a sector that for now exists almost only on paper) have been acquired for 924 million yuan to a state-owned company owned by the same county financial office, in what is actually a transfer of accounts from pocket to pocket. A third practice consists of pure and simple manufacturing of asset assets, with local financing vehicles repackaging low-value resources as high-value collateral to obtain bank credit. In Jiangxi, river sand reserves were valued at 6.68 billion yuan, in Heilongjiang, artificial basin disclosing rights were transferred for 839 million to a state-owned company created eleven days before the auction, and in Nanjing 70 billion public bus data lines were capitalized to obtain a line of credit.
The 10,000 billion yuan debt resolution plan launched by the central government at the end of 2024 that refinances a portion of the hidden debt by converting it into official local bonds, is inadequate for the scale of the problem. Estimates of the overall debt of local finance vehicles range from 65,000 billion yuan calculated by the IMF and 87,000 billion from a census of around 4,000 of these vehicles, and according to rating agency Fitch the restructured debt from the plan covers just a quarter of the the hidden portion of the liabilities. If the 47,000 billion official local bonds are added, the total debt of local governments is approaching 134,000 billion yuan, and the plan intervenes on less than a tenth of the total. Only 3% of financing vehicles record capital yields above 4%, about 10% are in net losses, and the aggregate profits of the entire system depend on over trillion yuan of state subsidies. The overall picture is that of a state that, in order to survive, progressively devours the economic ecosystem on which it depends. The developmental state of the reform era, which cultivated business growth to expand the tax base, is being replaced by a device that cannibalizes the private sector at the very moment when Beijing calls on that same sector to lead technological innovation and the transition to high manufacturing added value. The tax time bombs planted today, from 30-year concessions to the creation of non-existent assets and masked debt transferred into the commercial banking system, will manifest in the Thirties and Forties, when demographic and pension pressure will make the contradictions even more acute.
https://jamestown.substack.com/p/the-pr ... GaUDOo9vGg
or
https://jamestown.substack.com/p/the-pr ... ts-turn-to
**China: the state that devours itself**
Chinese local governments are going through the worst fiscal crisis since the founding of the Popular Republic. Exhausted the model based on the sale of land to real estate developers, the provincial and municipal administrations have set out on a path that risks compromising the very foundations of China’s economic growth. An analysis published by the Jamestown Foundation [link to full document is below], with an impressive module of documented cases, how local public power is transforming from a development engine into a predatory device capable of seizing assets from private companies in other provinces, auctioning essential public services for the next thirty years and manufacture non-existent assets to stay afloat.
For twenty years the fiscal pact based on the Chinese local administration has worked according to a relatively simple logic. Local governments sold land use rights to real estate developers, and the proceeds from those assignments often covered over 40% of the revenue, funding infrastructure, wages, and debt service. The collapse of the real estate bubble that began in 2021 has rendered that model obsolete. Revenue from residential land sales plunged 65% in 2025 from the peak of 2020, and the consequences have quickly spread from budget abstracts to the reality of daily life. In Guizhou Province and Henan, teachers have reported cancellation of bonuses and months delays in paying basic wages, while in Zhejiang, a traditional fiscal stronghold, officials have suffered annual cuts ranging from 50,000 to 150,000 yuan. In Shandong, district officials receive only 70% of the salary, often late. The entire structure of local public spending, which in China covers about 85% of the overall public spending (pensions, healthcare, unemployment benefits included), is under unprecedented pressure. Salary cuts and delays in payments represent the first level of the crisis, that of internal austerity in the state system. The Jamestown Foundation analysis, however, focuses on what comes next, namely when cutting spending is no longer enough and administrations begin to extract wealth from the surrounding economic environment.
The most widespread form of this extraction is the explosion of "non-tax" incomes, i.e. fines, confiscations and retroactive audits. Some municipalities under heavy debt pressure have recorded increases of more than 100% year on year for these reports. The most aggressive practice is the so-called "offshore fishing", in which police forces of domestic jurisdictions in fiscal difficulty conduct operations in the richest coastal areas, seizing property of private companies and withholding a percentage of confiscated funds. The landmark case is Archealth, a Guangdong healthcare company whose IPO was blown up by an operation of 1,600 agents sent from Henan. The judiciary, in theory the counterweight, has in many cases turned into an accomplice. In a 2025, a Shanxi court has frozen 19.3 million yuan of assets from a Shanghai-based valve manufacturer that had no business relations in the province, simply to secure liquidity to the local jurisdiction. At the same time, retroactive audit campaigns have begun to treat past entrepreneurial success as a savings account at the disposal of the current tax, with tax claims arrears up to thirty years ago.
When direct extraction proves to be insufficient, local governments resort to monetization of the future, auctioning 20-year or 30-year concession rights on essential public services. Funeral homes in Rongjiang County in Guizhou were sold for 127 million yuan, an amount almost equivalent to the quarter's entire fiscal revenue. In Zhuhai, Guangdong, the management rights of nearly 24,000 street parking lots have been handed over for 730 million yuan over a span of 20 years. Logic reaches its extreme when auctioned good becomes purely theoretical, as in the case of Pingyin County in Shandong, where the 30-year rights on the "low-altitude economy" (drones and airspace management, a sector that for now exists almost only on paper) have been acquired for 924 million yuan to a state-owned company owned by the same county financial office, in what is actually a transfer of accounts from pocket to pocket. A third practice consists of pure and simple manufacturing of asset assets, with local financing vehicles repackaging low-value resources as high-value collateral to obtain bank credit. In Jiangxi, river sand reserves were valued at 6.68 billion yuan, in Heilongjiang, artificial basin disclosing rights were transferred for 839 million to a state-owned company created eleven days before the auction, and in Nanjing 70 billion public bus data lines were capitalized to obtain a line of credit.
The 10,000 billion yuan debt resolution plan launched by the central government at the end of 2024 that refinances a portion of the hidden debt by converting it into official local bonds, is inadequate for the scale of the problem. Estimates of the overall debt of local finance vehicles range from 65,000 billion yuan calculated by the IMF and 87,000 billion from a census of around 4,000 of these vehicles, and according to rating agency Fitch the restructured debt from the plan covers just a quarter of the the hidden portion of the liabilities. If the 47,000 billion official local bonds are added, the total debt of local governments is approaching 134,000 billion yuan, and the plan intervenes on less than a tenth of the total. Only 3% of financing vehicles record capital yields above 4%, about 10% are in net losses, and the aggregate profits of the entire system depend on over trillion yuan of state subsidies. The overall picture is that of a state that, in order to survive, progressively devours the economic ecosystem on which it depends. The developmental state of the reform era, which cultivated business growth to expand the tax base, is being replaced by a device that cannibalizes the private sector at the very moment when Beijing calls on that same sector to lead technological innovation and the transition to high manufacturing added value. The tax time bombs planted today, from 30-year concessions to the creation of non-existent assets and masked debt transferred into the commercial banking system, will manifest in the Thirties and Forties, when demographic and pension pressure will make the contradictions even more acute.
https://jamestown.substack.com/p/the-pr ... GaUDOo9vGg
or
https://jamestown.substack.com/p/the-pr ... ts-turn-to
Re: China
One aspect of Chinese imperialism's expansion abroad--
Milan (AsiaNews) – Over the past 20 years, China has built a large presence in ports around the world, acquiring stakes or management roles in more than a hundred ports in four continents.
The total investment exceeds US$ 60 billion and involves a constellation of Chinese state-owned companies operating from East Africa and the Mediterranean to Latin America and Southeast Asia.
The extent of this became apparent only when geopolitical tensions brought into the spotlight what for years had remained a nearly invisible process.
The nature of this presence varies considerably. In 17 ports, Chinese companies hold majority stakes, while in most others, they are minority stakes or have operational management agreements. Projects are often implemented in partnership with local governments or private investors from the host country.
China’s underlying rationale is explicitly stated, i.e. to protect trade routes vital to the Chinese economy and ensure access to strategic raw materials by reducing maritime transport times.
For example, China imports about two thirds of the copper it consumes, and almost all of its energy needs pass through vulnerable maritime hubs like the Strait of Malacca, the Suez Canal, and the Panama Canal.
In recent years, China's financing model has changed. Until the middle of the last decade, bilateral loans, often opaque, granted by development banks to governments in difficulty, prevailed.
Since 2016, amid mounting unsustainable debt and accusations of neocolonialism, Beijing has favoured public-private partnerships in which Chinese companies invest their own capital, manage the infrastructure, and recoup their investment through tolls or long-term concessions.
For host governments, this means avoiding new direct sovereign debt and achieving rapid construction, but at the cost of relinquishing operational control for decades.
This approach is supported by an integrated industrial supply chain unlike any other in the West. State-owned groups such as COSCO, China Road and Bridge Corporation, and China Civil Engineering Construction Corporation, along with numerous other state-controlled enterprises, cover the entire chain, from construction to operation, offering comprehensive packages that strengthen China’s competitive advantage.
Three ports, three models: Greece, Panama, Cambodia
The diversity of Chinese port investments is evident in the case of the Piraeus (Greece), often cited as an example of successful trade integration. In 2016, COSCO acquired a 67 per cent stake in the port authority for more than US$ 1.5 billion. Since then, freight traffic has more than doubled, and the port has become Europe's fifth largest in terms of container traffic.
However, economic results have not eliminated tensions. European competition rules have limited COSCO's expansion in the railway sector, and unions have repeatedly criticised working conditions, while a segment of the public remains wary.
The Greek government of Prime Minister Kyriakos Mitsotakis has upheld the agreement, while strengthening ties with NATO and the United States in an attempt to balance economic openness to China with a strategic Euro-Atlantic positioning.
The Panamanian case is entirely different. CK Hutchison, a Hong Kong-based conglomerate, has managed the ports of Balboa and Cristobal, located at either end of the Panama Canal, since 1997.
On 29 January, Panama's Supreme Court declared the contract unconstitutional, annulling the concessions after an audit revealed accounting irregularities and a loss of state revenue exceeding US$ 1 billion.
The decision followed months of explicit pressure from Washington, with President Trump threatening to regain control of the canal.
This story can be interpreted in different ways. The contractual irregularities are documented, but US pressure played a decisive role. Complicating the situation was CK Hutchison's failed attempt to sell its ports to a consortium led by BlackRock and Mediterranean Shipping Company.
Beijing requested COSCO's entry with a majority stake and veto power, a proposal that was rejected by the other partners. The agreement thus collapsed, leaving Panama at the centre of a power struggle.
The third case is that of the Ream Naval Base in Cambodia, overlooking the Gulf of Thailand. Although the Cambodian government categorically denies that it is a permanent military base, satellite imagery shows structures compatible with the docking of warships and advanced logistics installations.
Ream is part of what analysts call the “string of pearls”, a chain of naval bases and strategic ports that China is building from the Indian Ocean to the Western Pacific to control trade routes and reduce its dependence on the Strait of Malacca, through which approximately 30 per cent of global maritime trade passes.
Trade or military strategy? The question of dual use
Among the ongoing issues in Western countries, there is debate over whether ports operated by Chinese companies could evolve into military bases or intelligence tools. The only certain precedent is Djibouti, where a commercial terminal became China's first overseas naval base in 2017.
Aside from this case and the more ambiguous Ream case, there is no evidence of a systematic conversion, although according to the United States, many ports have technical characteristics compatible with military use.
Concerns also involve access to traffic and route data, a significant wealth of information but no different, in principle, from that collected by port operators in other countries.
A more concrete issue touches the potential use of port control as an economic lever in the event of escalation. In theory, a Chinese company could limit access to ships from certain countries or give priority to traffic deemed friendly.
In practice, however, China is among the main beneficiaries of the stability of global shipping routes, and a disruption in flows would primarily affect its exports, making such a choice plausible only in the event of open conflict.
The crucial distinction therefore remains between peacetime and wartime situations. In a military crisis, ports like Ream or Piraeus could assume a logistical or interdiction function to support the Chinese navy, but this presupposes an ongoing armed confrontation between China and Western powers.
Some issues remain unresolved. The management of ports entrusted to Chinese companies is often opaque, and host governments' assurances that they are not used for military purposes are valid so long as these governments retain genuine autonomy from Beijing.
In the long run, it will be crucial to understand whether China’s presence will remain confined to the commercial dimension or whether it will assume a more explicitly strategic profile.
Chinese port expansion remains a hybrid trend, in which economic interests and geopolitical ambitions intertwine in ways that vary from case to case. Western countries have denounced this presence but have not offered concrete alternatives in terms of infrastructure investments.
So long as China remains the only truly available option, as African and Latin American officials have admitted, its global port network will continue to expand.
Milan (AsiaNews) – Over the past 20 years, China has built a large presence in ports around the world, acquiring stakes or management roles in more than a hundred ports in four continents.
The total investment exceeds US$ 60 billion and involves a constellation of Chinese state-owned companies operating from East Africa and the Mediterranean to Latin America and Southeast Asia.
The extent of this became apparent only when geopolitical tensions brought into the spotlight what for years had remained a nearly invisible process.
The nature of this presence varies considerably. In 17 ports, Chinese companies hold majority stakes, while in most others, they are minority stakes or have operational management agreements. Projects are often implemented in partnership with local governments or private investors from the host country.
China’s underlying rationale is explicitly stated, i.e. to protect trade routes vital to the Chinese economy and ensure access to strategic raw materials by reducing maritime transport times.
For example, China imports about two thirds of the copper it consumes, and almost all of its energy needs pass through vulnerable maritime hubs like the Strait of Malacca, the Suez Canal, and the Panama Canal.
In recent years, China's financing model has changed. Until the middle of the last decade, bilateral loans, often opaque, granted by development banks to governments in difficulty, prevailed.
Since 2016, amid mounting unsustainable debt and accusations of neocolonialism, Beijing has favoured public-private partnerships in which Chinese companies invest their own capital, manage the infrastructure, and recoup their investment through tolls or long-term concessions.
For host governments, this means avoiding new direct sovereign debt and achieving rapid construction, but at the cost of relinquishing operational control for decades.
This approach is supported by an integrated industrial supply chain unlike any other in the West. State-owned groups such as COSCO, China Road and Bridge Corporation, and China Civil Engineering Construction Corporation, along with numerous other state-controlled enterprises, cover the entire chain, from construction to operation, offering comprehensive packages that strengthen China’s competitive advantage.
Three ports, three models: Greece, Panama, Cambodia
The diversity of Chinese port investments is evident in the case of the Piraeus (Greece), often cited as an example of successful trade integration. In 2016, COSCO acquired a 67 per cent stake in the port authority for more than US$ 1.5 billion. Since then, freight traffic has more than doubled, and the port has become Europe's fifth largest in terms of container traffic.
However, economic results have not eliminated tensions. European competition rules have limited COSCO's expansion in the railway sector, and unions have repeatedly criticised working conditions, while a segment of the public remains wary.
The Greek government of Prime Minister Kyriakos Mitsotakis has upheld the agreement, while strengthening ties with NATO and the United States in an attempt to balance economic openness to China with a strategic Euro-Atlantic positioning.
The Panamanian case is entirely different. CK Hutchison, a Hong Kong-based conglomerate, has managed the ports of Balboa and Cristobal, located at either end of the Panama Canal, since 1997.
On 29 January, Panama's Supreme Court declared the contract unconstitutional, annulling the concessions after an audit revealed accounting irregularities and a loss of state revenue exceeding US$ 1 billion.
The decision followed months of explicit pressure from Washington, with President Trump threatening to regain control of the canal.
This story can be interpreted in different ways. The contractual irregularities are documented, but US pressure played a decisive role. Complicating the situation was CK Hutchison's failed attempt to sell its ports to a consortium led by BlackRock and Mediterranean Shipping Company.
Beijing requested COSCO's entry with a majority stake and veto power, a proposal that was rejected by the other partners. The agreement thus collapsed, leaving Panama at the centre of a power struggle.
The third case is that of the Ream Naval Base in Cambodia, overlooking the Gulf of Thailand. Although the Cambodian government categorically denies that it is a permanent military base, satellite imagery shows structures compatible with the docking of warships and advanced logistics installations.
Ream is part of what analysts call the “string of pearls”, a chain of naval bases and strategic ports that China is building from the Indian Ocean to the Western Pacific to control trade routes and reduce its dependence on the Strait of Malacca, through which approximately 30 per cent of global maritime trade passes.
Trade or military strategy? The question of dual use
Among the ongoing issues in Western countries, there is debate over whether ports operated by Chinese companies could evolve into military bases or intelligence tools. The only certain precedent is Djibouti, where a commercial terminal became China's first overseas naval base in 2017.
Aside from this case and the more ambiguous Ream case, there is no evidence of a systematic conversion, although according to the United States, many ports have technical characteristics compatible with military use.
Concerns also involve access to traffic and route data, a significant wealth of information but no different, in principle, from that collected by port operators in other countries.
A more concrete issue touches the potential use of port control as an economic lever in the event of escalation. In theory, a Chinese company could limit access to ships from certain countries or give priority to traffic deemed friendly.
In practice, however, China is among the main beneficiaries of the stability of global shipping routes, and a disruption in flows would primarily affect its exports, making such a choice plausible only in the event of open conflict.
The crucial distinction therefore remains between peacetime and wartime situations. In a military crisis, ports like Ream or Piraeus could assume a logistical or interdiction function to support the Chinese navy, but this presupposes an ongoing armed confrontation between China and Western powers.
Some issues remain unresolved. The management of ports entrusted to Chinese companies is often opaque, and host governments' assurances that they are not used for military purposes are valid so long as these governments retain genuine autonomy from Beijing.
In the long run, it will be crucial to understand whether China’s presence will remain confined to the commercial dimension or whether it will assume a more explicitly strategic profile.
Chinese port expansion remains a hybrid trend, in which economic interests and geopolitical ambitions intertwine in ways that vary from case to case. Western countries have denounced this presence but have not offered concrete alternatives in terms of infrastructure investments.
So long as China remains the only truly available option, as African and Latin American officials have admitted, its global port network will continue to expand.
Re: China
This is by Andrea Ferrario, who often posts informative articles about China and East Asia on Facebook. This translation from Italian only has a handful of errors.
China strengthens state as economy weakens
Beijing aims to consolidate the army, security and strategic industries, but leaves families and workers exposed to an increasingly fragile economy
Andrea Ferrario
Jul 13, 2026
[With this article the newsletter resumes regular publications after the long break due to my move]
In recent weeks, three reports have come from China that, at first glance, seem to have nothing in common. The Ministry of Human Resources has published the five-year employment plan without indicating, for the first time in decades, a goal for creating new jobs in cities. The coastguard conducted its first patrol operation in the waters east of Taiwan, on the Pacific side. Xi Jinping, finally, appointed the new head of military anti-corruption, while the full-blown generals appeared in public in recent months are counted on the fingers of one hand.
We are faced with a state that stops promising work to its own citizens, while extending the range of its coercion tools and rebuilding the military hierarchy through purges. Put together, the three news stories draw the profile of a system that focuses resources and efforts on the tools aimed at projecting and consolidating its power, while the economic basis on which that power rests continues to weaken. It is worth examining them one by one and analyzing their mutual links, because the thread that unites them says a lot about today’s situation in China.
The promise that is no longer made
In March 2007, then-Prime Minister Wen Jiabao called the Chinese economy “unstable, unbalanced, uncoordinated and unsustainable.” With his words he intended to draw attention to the excessive dependence on investment and exports, and his diagnosis became the official foundation of what has since been called “rebalancing”, that is, the shift of the engine of growth from production destined abroad to the demand of Chinese households. The American economist Stephen Roach, present at that press conference and among the first to bring the subject to the Western debate, has just signed a sort of death certificate of the project. The data on which he is based speaks for himself. In 2005, household consumption accounted for 39.8% of gross domestic product. The last available survey, referring to 2024, places them at 39.9%. Two decades of plans, summits and proclaimed priorities have produced an increase of one-tenth of a point; given the weakness in consumption over the last year and a half, the share is likely to have now fallen below the starting level. Last May retail sales fell 0.6 percent year-on-year, marking the first monthly backlog from the pandemic.
The primary immediate cause of this paralysis is the home. Housing is the main tool of saving the Chinese, but it is a heritage that inexorably continues to erode. In June, the prices of used homes, those really determined by supply and demand and not by the calming price lists of builders, fell in 88 of the 100 largest cities monitored by the China Index Academy, with annual losses of between 5 and 11% depending on the city. In the first five months of the year, sales of new homes fell by 13.5% in terms of value, while the start-up of new construction sites fell by more than 20%. The figure that has provoked the most discussions in Chinese social media is, however, the one published last spring by the Bank for International Settlements, the Basel institution that collects central bank statistics. Net of inflation, real housing prices fell below 2006 levels; in nominal terms, they fell to 2016 levels, with losses above 40% higher than the peak in numerous cities. For those who bought between 2018 and 2021, often going into debt for decades and drawing on the savings of two generations, the assets have reduced from a third to half. You don’t need great theoretical reasoning to understand why such people can no longer spend as they used to. At the origin of all this there is the collapse of the real estate system, to which, however, are added other factors that aggravate the crisis. The population has declined since 2022, the intense urbanization that once fueled the demand for housing has run out and, with the exception of the most luxurious areas of the metropolis, the properties on the market exceed the demand.
This month, the work piece has been added to this. The previous six five-year plans all set a target for creating new jobs in urban areas of the order of tens of millions (over 55 in the top floor). The one just published merely promises jobs "on a considerable scale". Reticence is explained by numbers. Urban employment grew by just two million units in 2025, compared with eleven million in 2023, and by the roughly 180 million migrant workers who were looking for employment last year, 49 million had to return to the villages. The share of the workforce employed in agriculture has increased as it had not happened in practice for decades, says research firm Gavekal. A country that for forty years has absorbed labor from the countryside in factories has begun to travel the reverse road.
Prices down, goods out
The combination of an intact production capacity and stagnant domestic demand produces its most immediate effect on prices. In June, producer prices fell again on a monthly basis after the brief spring rebound linked to rising energy prices following the war in Iran. Before that bracket, they had fallen for over forty consecutive months. According to the German study center Merics, almost one in four Chinese companies operates at a loss, while in the first five months of the year private investment fell by 7.1%. The deflationary trend is becoming increasingly insidious. Those who expect lower prices tomorrow postpone purchases and investments, and in doing so contribute to push them even lower.
Companies are looking for a way out of this domestic crisis on foreign markets, and the automotive sector offers a striking example. In June domestic sales plunged 23 per cent year-on-year, stopping at 1.6 million vehicles, while exports rose 82 per cent. If you look at the economy as a whole, exports now generate two-thirds of GDP growth; in the first quarter the flow of goods to Europe grew by 18% and in 2025 the trade surplus reached an absolute record of 1,200 billion dollars. But even these flows of money from abroad cannot give rise to the domestic economy. At one time the central bank absorbed almost entirely the inflow into official reserves, investing them in American government bonds. Today recycling takes place mainly through private entities and, in 2025, portfolio investments have recorded net outflows of 426 billion dollars, largely directed towards foreign stocks and bonds purchased through Hong Kong. The official reading speaks of greater financial openness. A less ritual reading observes that those who own capital in China, in the face of a stock exchange that has remained stagnant for years, a falling real estate market and deposits from the lower yield than inflation, transfers everything it can abroad. It's the classic capital flight.
Accounts that speak of austerity
In the face of this picture, Beijing's response is especially striking for what is missing. In mid-June the central bank's governor, Pan Gongsheng, devoted an entire speech to the technical reform of the interest rate determination mechanism, without hinting that a cut was imminent. The budget approved in March reduced the overall government deficit compared to what was planned in the previous plan and, in the first five months of the year, the actual deficit also decreased, according to official data. Bloomberg columnist Daniel Moss called this trend unusual, which in an economy with inflation stopped around 1 percent amounts to an austerity policy. The summits are fully aware of the problem. Huang Yiping, a member of the monetary policy committee of the central bank, called the rebalancing a “crucial” task, noting that such a massive contribution of exports to growth is not sustainable. Words, however, continue not to follow facts, as has been the case for twenty years.
However, there is a less reassuring explanation of the simple prudence: the Chinese state may be much less rich than the self-image it projects suggests. According to the Rhodium Group’s elaborations, in 2025 tax revenues fell by 1.7% in absolute terms and now account for 15.4% of GDP, less than half of the average of advanced economies. China's tax system is focused on investment-driven growth: it taxes output much more than income and assets, and when investment slows and producer prices drop, revenue dries up.
How much the situation is stretched at the lower levels of the administration emerges clearly from the chronicles of these weeks. The party's disciplinary commission has announced that the government of Nanning, capital of Guangxi, has "sold" eighteen times the same ground, generating fake contracts to inflate by 2.83 billion yuan the revenue of 2024, after the actual proceeds of land sales had collapsed to a fifth of those of 2020. In addition, the national audit office singled out 21 provinces and cities that last year falsified revenue of nearly 60 billion yuan, while an analyst from Shenwan Hongyuan estimates that provincial administration deficits are around 5,000 billion yuan. The same office found that even the Bank of China, one of the four large state banks, subtracted about 2.4 billion tax yuan from the tax authorities. The fact that the center makes similar events public is certainly not an indication of a sudden love for transparency. It is rather the behavior of a taxman who needs every yuan and goes to look for him even within his own apparatus.
To the fragility of public finances is added to that of the banking system. At the beginning of July, regulators commissioned Zhongbang Bank, a private institution from Hubei, which grew up by collecting online deposits at off-market rates, citing “serious credit risks” and entrusting it with absorption to a bank controlled by the municipality of Wuhan. The case, taken in isolation, is small in size, but the central bank’s financial stability report places as many as 312 institutions in the “red zone” of risk. The piloted bailouts of small regional banks, absorbed one by larger public entities, have been following each other for years with regularity.
An apparatus that continues to grow despite the purges
On the side of power, the movement goes in the opposite direction. While the internal economy is losing more and more blows, the coercive and external projection instruments are multiplying, despite the fact that the internal context is anything but stable. As already extensively analyzed in my past articles, since 2023 26 generals of the People’s Liberation Army have come under investigation, including two former vice-presidents of the Central Military Commission, the body that commands the armed forces and which Xi presides over; two former defense ministers have also received death sentences with suspension of sentence. Only Xi and the outgoing head of the disciplinary apparatus remain operational from the Commission leaving the last congress. The new appointments decided by Xi this month, with the promotion to general of Zhang Shuguang at the helm of military anti-corruption and Wang Gang at the command of the air force, mark the start of the reconstruction of a summit that will have to be redone almost entirely by the party congress scheduled for the fall of 2027. By convention, in fact, the members of the committee must have the rank of general in their own right, and of generals still visible in public remain in all only four.
Over the same period, pressure on Taiwan extended to a new theatre. Last month the Chinese coastguard operated for the first time in the waters east of the island, those through which, in the event of a conflict, would pass supplies and external aid. It inspected ships in transit, conducted water surveys and patrolled in the vicinity of submarine cables connecting Taiwan to the rest of the world, as the Financial Times rebuilt. In parallel, an institute of the Ministry of Natural Resources declared illegal, because conducted without consulting China, negotiations between Japan and the Philippines to delimit their respective exclusive economic zones in the area, i.e. the seabeds on which international law recognizes to individual coastal states economic rights. Japanese research vessels also received radio intimations near the Senkaku Islands. It is the script already tested in the South China Sea: an initially administrative presence, destined to become military, the construction of a legal position through repeated acts and the use of the coast guard to increase the pressure without crossing the threshold of the act of war. The novelties are the extension of this scheme to the eastern side of Taiwan and the chosen moment: Washington evoked the possibility of using arms sales in Taipei as a bargaining chip in trade negotiations with Beijing, and its reaction to patrols was visibly more subdued than that, rare and joint, of London, Berlin and Paris.
The contemporaneity of the two developments, the permanent purge inside and the operational expansion outside, is at first glance contradictory, but it ceases to be so if you read the Chinese armed forces as an army that has coordinates different from those of the vast majority of the other armies. By statute and history, they are the arm of the party, and their political reliability comes before military efficiency.
Where the state wants the money to go
And this is where the economic thread and the power thread get knotted. The most solid explanation of the failure to rebalance, what Roach himself considers decisive, is the precautionary savings. Chinese households set aside huge income shares because health care, pensions and social shock absorbers offer insufficient guarantees, and those who fear the future do not consume. Turning those savings into demand would require massive and permanent transfers of income and security from the state to workers, resulting in de facto transfers of rights and bargaining power. Not discount coupons for the change of appliances, as it has been so far, but an effective welfare network.
Such a transfer never happened, and the same weeks that the new five-year plan gave up the employment target showed where the resources are instead going. Premier Li Qiang came to quote by name, which is very rare for a Chinese executive, the robotics company Unitree and his valuation that multiplied by four thousand in a single decade, and he did so on the eve of his listing on the stock exchange. As the Economist has documented, state-bound investment funds have accumulated twenty times higher than those of the year before technology at the end of 2025, the stock market prices of tech companies have raised this year twice as much as 2025, and the market supervisory authority has now also among its tasks to ensure that capital flows towards the technological objectives set by the party, from artificial intelligence to humanoid robots. Savers follow the signal, shifting money from consumer goods stocks, down 15 percent this year, to tech stocks, up 20 percent. The circle closes on itself. Even the savings that households entrust to markets are channelled towards the industrial priorities of the state, not towards the sectors that live by their spending.
The picture coincides with what, on another side, is described by security scholars. Matt Brazil, in a recent essay for The Diplomat, paints the Chinese apparatus of intelligence and security as a party-bound ecosystem that selectively mobilizes the sectors of society useful for its purposes, such as businesses and universities, while the majority of citizens keep away from party policies as soon as it can. It's a description that's not just about espionage. The prudence with which households accumulate savings and the selective mobilization of the population respond to the same logic, applied in different areas. The state considers society first and foremost a reserve of resources to be exploited. A safer economic, and therefore more autonomous, population would reduce this availability. It is a risk that the party, despite twenty years of useful opportunities, has never shown it wants to run. Current distribution of resources is not a dysfunction of the system. It's the system.
For forty years the five-year plans have been the language by which the Communist Party has communicated its ambitions, and all ambitions have always been accompanied by figures. The employment plan published in July only promises that jobs will remain “on a considerable scale” and that employment will be stable overall until 2030. In a system that has always been measured by numbers, the disappearance of a figure is perhaps the most faithful photograph of the imbalance between a state that continues to strengthen and the economy that should support it but trudges on.
https://www.facebook.com/andrea.ferrari ... %2CO%2CP-R
China strengthens state as economy weakens
Beijing aims to consolidate the army, security and strategic industries, but leaves families and workers exposed to an increasingly fragile economy
Andrea Ferrario
Jul 13, 2026
[With this article the newsletter resumes regular publications after the long break due to my move]
In recent weeks, three reports have come from China that, at first glance, seem to have nothing in common. The Ministry of Human Resources has published the five-year employment plan without indicating, for the first time in decades, a goal for creating new jobs in cities. The coastguard conducted its first patrol operation in the waters east of Taiwan, on the Pacific side. Xi Jinping, finally, appointed the new head of military anti-corruption, while the full-blown generals appeared in public in recent months are counted on the fingers of one hand.
We are faced with a state that stops promising work to its own citizens, while extending the range of its coercion tools and rebuilding the military hierarchy through purges. Put together, the three news stories draw the profile of a system that focuses resources and efforts on the tools aimed at projecting and consolidating its power, while the economic basis on which that power rests continues to weaken. It is worth examining them one by one and analyzing their mutual links, because the thread that unites them says a lot about today’s situation in China.
The promise that is no longer made
In March 2007, then-Prime Minister Wen Jiabao called the Chinese economy “unstable, unbalanced, uncoordinated and unsustainable.” With his words he intended to draw attention to the excessive dependence on investment and exports, and his diagnosis became the official foundation of what has since been called “rebalancing”, that is, the shift of the engine of growth from production destined abroad to the demand of Chinese households. The American economist Stephen Roach, present at that press conference and among the first to bring the subject to the Western debate, has just signed a sort of death certificate of the project. The data on which he is based speaks for himself. In 2005, household consumption accounted for 39.8% of gross domestic product. The last available survey, referring to 2024, places them at 39.9%. Two decades of plans, summits and proclaimed priorities have produced an increase of one-tenth of a point; given the weakness in consumption over the last year and a half, the share is likely to have now fallen below the starting level. Last May retail sales fell 0.6 percent year-on-year, marking the first monthly backlog from the pandemic.
The primary immediate cause of this paralysis is the home. Housing is the main tool of saving the Chinese, but it is a heritage that inexorably continues to erode. In June, the prices of used homes, those really determined by supply and demand and not by the calming price lists of builders, fell in 88 of the 100 largest cities monitored by the China Index Academy, with annual losses of between 5 and 11% depending on the city. In the first five months of the year, sales of new homes fell by 13.5% in terms of value, while the start-up of new construction sites fell by more than 20%. The figure that has provoked the most discussions in Chinese social media is, however, the one published last spring by the Bank for International Settlements, the Basel institution that collects central bank statistics. Net of inflation, real housing prices fell below 2006 levels; in nominal terms, they fell to 2016 levels, with losses above 40% higher than the peak in numerous cities. For those who bought between 2018 and 2021, often going into debt for decades and drawing on the savings of two generations, the assets have reduced from a third to half. You don’t need great theoretical reasoning to understand why such people can no longer spend as they used to. At the origin of all this there is the collapse of the real estate system, to which, however, are added other factors that aggravate the crisis. The population has declined since 2022, the intense urbanization that once fueled the demand for housing has run out and, with the exception of the most luxurious areas of the metropolis, the properties on the market exceed the demand.
This month, the work piece has been added to this. The previous six five-year plans all set a target for creating new jobs in urban areas of the order of tens of millions (over 55 in the top floor). The one just published merely promises jobs "on a considerable scale". Reticence is explained by numbers. Urban employment grew by just two million units in 2025, compared with eleven million in 2023, and by the roughly 180 million migrant workers who were looking for employment last year, 49 million had to return to the villages. The share of the workforce employed in agriculture has increased as it had not happened in practice for decades, says research firm Gavekal. A country that for forty years has absorbed labor from the countryside in factories has begun to travel the reverse road.
Prices down, goods out
The combination of an intact production capacity and stagnant domestic demand produces its most immediate effect on prices. In June, producer prices fell again on a monthly basis after the brief spring rebound linked to rising energy prices following the war in Iran. Before that bracket, they had fallen for over forty consecutive months. According to the German study center Merics, almost one in four Chinese companies operates at a loss, while in the first five months of the year private investment fell by 7.1%. The deflationary trend is becoming increasingly insidious. Those who expect lower prices tomorrow postpone purchases and investments, and in doing so contribute to push them even lower.
Companies are looking for a way out of this domestic crisis on foreign markets, and the automotive sector offers a striking example. In June domestic sales plunged 23 per cent year-on-year, stopping at 1.6 million vehicles, while exports rose 82 per cent. If you look at the economy as a whole, exports now generate two-thirds of GDP growth; in the first quarter the flow of goods to Europe grew by 18% and in 2025 the trade surplus reached an absolute record of 1,200 billion dollars. But even these flows of money from abroad cannot give rise to the domestic economy. At one time the central bank absorbed almost entirely the inflow into official reserves, investing them in American government bonds. Today recycling takes place mainly through private entities and, in 2025, portfolio investments have recorded net outflows of 426 billion dollars, largely directed towards foreign stocks and bonds purchased through Hong Kong. The official reading speaks of greater financial openness. A less ritual reading observes that those who own capital in China, in the face of a stock exchange that has remained stagnant for years, a falling real estate market and deposits from the lower yield than inflation, transfers everything it can abroad. It's the classic capital flight.
Accounts that speak of austerity
In the face of this picture, Beijing's response is especially striking for what is missing. In mid-June the central bank's governor, Pan Gongsheng, devoted an entire speech to the technical reform of the interest rate determination mechanism, without hinting that a cut was imminent. The budget approved in March reduced the overall government deficit compared to what was planned in the previous plan and, in the first five months of the year, the actual deficit also decreased, according to official data. Bloomberg columnist Daniel Moss called this trend unusual, which in an economy with inflation stopped around 1 percent amounts to an austerity policy. The summits are fully aware of the problem. Huang Yiping, a member of the monetary policy committee of the central bank, called the rebalancing a “crucial” task, noting that such a massive contribution of exports to growth is not sustainable. Words, however, continue not to follow facts, as has been the case for twenty years.
However, there is a less reassuring explanation of the simple prudence: the Chinese state may be much less rich than the self-image it projects suggests. According to the Rhodium Group’s elaborations, in 2025 tax revenues fell by 1.7% in absolute terms and now account for 15.4% of GDP, less than half of the average of advanced economies. China's tax system is focused on investment-driven growth: it taxes output much more than income and assets, and when investment slows and producer prices drop, revenue dries up.
How much the situation is stretched at the lower levels of the administration emerges clearly from the chronicles of these weeks. The party's disciplinary commission has announced that the government of Nanning, capital of Guangxi, has "sold" eighteen times the same ground, generating fake contracts to inflate by 2.83 billion yuan the revenue of 2024, after the actual proceeds of land sales had collapsed to a fifth of those of 2020. In addition, the national audit office singled out 21 provinces and cities that last year falsified revenue of nearly 60 billion yuan, while an analyst from Shenwan Hongyuan estimates that provincial administration deficits are around 5,000 billion yuan. The same office found that even the Bank of China, one of the four large state banks, subtracted about 2.4 billion tax yuan from the tax authorities. The fact that the center makes similar events public is certainly not an indication of a sudden love for transparency. It is rather the behavior of a taxman who needs every yuan and goes to look for him even within his own apparatus.
To the fragility of public finances is added to that of the banking system. At the beginning of July, regulators commissioned Zhongbang Bank, a private institution from Hubei, which grew up by collecting online deposits at off-market rates, citing “serious credit risks” and entrusting it with absorption to a bank controlled by the municipality of Wuhan. The case, taken in isolation, is small in size, but the central bank’s financial stability report places as many as 312 institutions in the “red zone” of risk. The piloted bailouts of small regional banks, absorbed one by larger public entities, have been following each other for years with regularity.
An apparatus that continues to grow despite the purges
On the side of power, the movement goes in the opposite direction. While the internal economy is losing more and more blows, the coercive and external projection instruments are multiplying, despite the fact that the internal context is anything but stable. As already extensively analyzed in my past articles, since 2023 26 generals of the People’s Liberation Army have come under investigation, including two former vice-presidents of the Central Military Commission, the body that commands the armed forces and which Xi presides over; two former defense ministers have also received death sentences with suspension of sentence. Only Xi and the outgoing head of the disciplinary apparatus remain operational from the Commission leaving the last congress. The new appointments decided by Xi this month, with the promotion to general of Zhang Shuguang at the helm of military anti-corruption and Wang Gang at the command of the air force, mark the start of the reconstruction of a summit that will have to be redone almost entirely by the party congress scheduled for the fall of 2027. By convention, in fact, the members of the committee must have the rank of general in their own right, and of generals still visible in public remain in all only four.
Over the same period, pressure on Taiwan extended to a new theatre. Last month the Chinese coastguard operated for the first time in the waters east of the island, those through which, in the event of a conflict, would pass supplies and external aid. It inspected ships in transit, conducted water surveys and patrolled in the vicinity of submarine cables connecting Taiwan to the rest of the world, as the Financial Times rebuilt. In parallel, an institute of the Ministry of Natural Resources declared illegal, because conducted without consulting China, negotiations between Japan and the Philippines to delimit their respective exclusive economic zones in the area, i.e. the seabeds on which international law recognizes to individual coastal states economic rights. Japanese research vessels also received radio intimations near the Senkaku Islands. It is the script already tested in the South China Sea: an initially administrative presence, destined to become military, the construction of a legal position through repeated acts and the use of the coast guard to increase the pressure without crossing the threshold of the act of war. The novelties are the extension of this scheme to the eastern side of Taiwan and the chosen moment: Washington evoked the possibility of using arms sales in Taipei as a bargaining chip in trade negotiations with Beijing, and its reaction to patrols was visibly more subdued than that, rare and joint, of London, Berlin and Paris.
The contemporaneity of the two developments, the permanent purge inside and the operational expansion outside, is at first glance contradictory, but it ceases to be so if you read the Chinese armed forces as an army that has coordinates different from those of the vast majority of the other armies. By statute and history, they are the arm of the party, and their political reliability comes before military efficiency.
Where the state wants the money to go
And this is where the economic thread and the power thread get knotted. The most solid explanation of the failure to rebalance, what Roach himself considers decisive, is the precautionary savings. Chinese households set aside huge income shares because health care, pensions and social shock absorbers offer insufficient guarantees, and those who fear the future do not consume. Turning those savings into demand would require massive and permanent transfers of income and security from the state to workers, resulting in de facto transfers of rights and bargaining power. Not discount coupons for the change of appliances, as it has been so far, but an effective welfare network.
Such a transfer never happened, and the same weeks that the new five-year plan gave up the employment target showed where the resources are instead going. Premier Li Qiang came to quote by name, which is very rare for a Chinese executive, the robotics company Unitree and his valuation that multiplied by four thousand in a single decade, and he did so on the eve of his listing on the stock exchange. As the Economist has documented, state-bound investment funds have accumulated twenty times higher than those of the year before technology at the end of 2025, the stock market prices of tech companies have raised this year twice as much as 2025, and the market supervisory authority has now also among its tasks to ensure that capital flows towards the technological objectives set by the party, from artificial intelligence to humanoid robots. Savers follow the signal, shifting money from consumer goods stocks, down 15 percent this year, to tech stocks, up 20 percent. The circle closes on itself. Even the savings that households entrust to markets are channelled towards the industrial priorities of the state, not towards the sectors that live by their spending.
The picture coincides with what, on another side, is described by security scholars. Matt Brazil, in a recent essay for The Diplomat, paints the Chinese apparatus of intelligence and security as a party-bound ecosystem that selectively mobilizes the sectors of society useful for its purposes, such as businesses and universities, while the majority of citizens keep away from party policies as soon as it can. It's a description that's not just about espionage. The prudence with which households accumulate savings and the selective mobilization of the population respond to the same logic, applied in different areas. The state considers society first and foremost a reserve of resources to be exploited. A safer economic, and therefore more autonomous, population would reduce this availability. It is a risk that the party, despite twenty years of useful opportunities, has never shown it wants to run. Current distribution of resources is not a dysfunction of the system. It's the system.
For forty years the five-year plans have been the language by which the Communist Party has communicated its ambitions, and all ambitions have always been accompanied by figures. The employment plan published in July only promises that jobs will remain “on a considerable scale” and that employment will be stable overall until 2030. In a system that has always been measured by numbers, the disappearance of a figure is perhaps the most faithful photograph of the imbalance between a state that continues to strengthen and the economy that should support it but trudges on.
https://www.facebook.com/andrea.ferrari ... %2CO%2CP-R