China's Tale of Two Economies

When I write and talk about how many Chinese are struggling, people often ask me why when China’s economy is doing so well. As a famous British author once wrote, “it is the best of times, it is the worst of times, we have everything before us, we have nothing before us, it is the spring of hope, it is the winter of despair.” A bit of hyperbole, but China is a Tale of Two Economies, with both the strong and weak sharing an uneasy co-existence.

The Strong. Not surprisingly, we see China through the lenses of the media and government we read, listen to, and watch. For most of us in the West, these sources more often than not trumpet a Chinese juggernaut that is raking in profits, cornering markets, and innovating to beat the band. While much of this news paints an unflattering and fearsome image of a monopolistic Chinese giant, it is a China whose economy is roaring.

China’s exports are indeed surging, even to an America that is drinking deeply from the well of tariffs and sanctions. Chinese hybrid and NEV vehicles are taking over in virtually every corner of the globe, including North America (albeit with a gaping hole in the middle). Chinese companies sent record numbers of air conditioners to Europe this past summer when the continent was baking. China is now the largest trading partner for almost 73% of the world (150+ countries). China is an economic behemoth with growing global clout.

The Weak. Domestically, China presents a much frailer, less confident, and strained economy. Business competition is cutthroat. Margins are squeezed. Growth is sagging. Vacant retail storefronts and dark offices remain abundant. When tenants are to be had, rents are depressed and lease terms inconsistent. Record under- and unemployment continues to plague the young and not so young.

The government shuttered approximately 25% (670) of all banks in the country in 2025. Most were small, rural institutions beset by weak lending, bad loans, sagging revenue, and poor governance. The real estate market, which fueled the rapid expansion of the Chinese middle class for decades, remains mired in the doldrums. There have been flickers of life in the largest of the large cities, but the Chinese government’s actions to lower lender costs, offer mortgage subsidies, and require builders to finish properties before selling them have yet to set the floor, let alone unleash growth.

Likewise, government efforts to provide subsidies toward the purchases of appliances and other consumables have resulted in short-term boosts, but not the legs required to make the Chinese people restart buying in meaningful amounts. Even when the Chinese are in a buying mood, individual consumption in China hovers at less than 40% of GDP, whereby it is almost 70% in America.

The stress of urban life (where almost 70% of the population now resides), the expense of urban life, the lack of a solid social-safety net, tighter governmental control over many aspects of life, and the corresponding uncertainties of planning for the future weigh heavily on the Chinese and are reflected in a significant lack of confidence on Main Street.