Expert: Grim Outlook for China's Economy, Poorest Struggle for Food

Recently, a netizen captured video in Shunde City, Guangdong Province, showing deserted streets, a result of massive factory closures, departing workers, and sparse pedestrian traffic, reflecting a prolonged slump in domestic demand. (Video screenshot)

[People News] China's economy has been struggling in recent years due to foreign businesses leaving, weak domestic demand, the real estate crisis, a surge in unemployment, and mounting local government debt pressures. The country is now facing significant deflationary pressure. Many are calling on the CCP government to implement effective measures to spur economic growth. On November 8, the CCP finally approved a 6 trillion yuan plan to help local governments refinance their massive debts. At a press conference, Finance Minister Lan Fo'an announced that from 2024 to 2026, 2 trillion yuan per year would be allocated to help local governments resolve their debts.

However, according to data from the International Monetary Fund, by the end of 2023, the total debt of China's central and local governments had reached 147 trillion yuan, accounting for 117% of GDP. The 6 trillion yuan allocation may barely cover the interest on the debt, providing little benefit to the public and doing even less to stimulate economic growth.

The CCP’s debt relief plan has sparked widespread discussion. The Associated Press noted that for much of this year, the Communist Party seemed more focused on addressing long-term structural economic issues rather than short-term ones. Previous measures to stimulate the economy were piecemeal, seemingly aimed at keeping the economy functioning rather than driving a strong recovery.

Fu Peng, Chief Economist at Northeast Securities, recently delivered a speech with a pessimistic outlook on China's economic future. The video of his talk has gone viral online. However, as Fu’s views conflict with Xi Jinping's "economic optimism narrative," both his video and its content have been censored by the CCP.

Grim Economic Outlook: The Poorest Are Left Without Food

According to content from Fu Peng's speech circulating on overseas networks, he spoke at an HSBC Private Wealth client event in Shanghai on November 24, where he candidly stated that China’s economic problems are far more severe than they appear on the surface and that the CCP government has very limited "cards to play." He urged all sectors to prepare themselves mentally for the challenges ahead.

The theme of Fu Peng’s speech was "2024 Year-End Review and 2025 Outlook: Hedging Risks vs. Soft Landing." He emphasized that China's economic troubles began even before the pandemic in 2019 and have worsened in recent years. He identified insufficient effective consumption as the core issue of the economy.

Fu argued that the decline in consumption capacity is not a short-term issue but a structural shift. To address this challenge, domestic demand must be boosted, which requires redistributing benefits between the government and residents, between rich and poor, and between debt and leverage. In China, however, when the economy contracts and growth slows, the burden first falls on the lower classes, and the very poorest are left without enough to eat.

Fu pointed out that the most immediate challenge for the Chinese economy is the sharp shrinkage of the middle class. "Why has the economy been declining since March this year? The answer is very simple: the collapse of the middle class. Remember, the contraction of the middle class has the greatest impact on the macroeconomy."

Fu explained that over the past 20 years, the growth of China’s real estate market relied on two factors: population dividends and leverage expansion. Now, the model requires young people to step in as "heirs to the market," but their capacity to do so is significantly lacking, making this approach unsustainable.

Fu painted a bleak picture for next year’s economic prospects, stating that the room for maneuver in interest rate, exchange rate, and fiscal policy is very limited: "Interest rates could go lower, perhaps even below 2%. The exchange rate could be adjusted upwards, between 7.3 and 7.8. Fiscal spending could be expanded further. But these are the only cards left to play, so how could they be played all at once?"

Fu also criticized the restrictive media environment, stating: "Whoever says something isn’t working is branded a traitor, unpatriotic, or attacked online." "But the real danger is if no one speaks out. At critical moments, misinformation feedback loops will create systemic errors. When this happens, even decision-makers will make wrong judgments, and that will spell disaster. In the end, history will accurately judge who truly harmed the country and the people."

Since last year, CCP leader Xi Jinping and Politburo Standing Committee member Cai Qi, who oversees propaganda, have emphasized promoting an "economic optimism narrative." Over the past year, numerous Chinese economists have been silenced for expressing views that conflict with the official narrative.

Netizens have commented: "Fu Peng is in danger. He’s probably going to be silenced soon."

No Political Reform, Economy Faces Decline

On December 1, independent commentator Cai Shenkun shared his thoughts on X (formerly Twitter), noting that Fu Peng "used relatively simple and understandable language, rather than economic jargon, to convey some harsh truths, earning widespread recognition." Cai also expressed surprise at the strong desire among many people to seek wealth in China’s heavily centralized, planned economy system.

Fu Peng’s speech has sparked significant discussion among overseas netizens. Some comments include: "It boils down to one sentence: if the CCP doesn’t step down, everything is empty talk." "Finally, someone directly pointed out that a 30-year mortgage is essentially a 30-year labor force overdraft." "Back when I was in Beijing, I told countless people: don’t buy property, don’t invest in A-shares, don’t put your money in financial products. Exchange for US dollars or USDC, and take a look at the real world abroad. How many listened? Some felt I was blocking their financial prospects, insisting that ‘the government won’t let housing prices fall.’ Others dismissed it outright, claiming foreign accounts were all fake. Their suffering is a reflection of their mindset. Some people just don’t deserve sympathy."

User @1110-d3r pointed out: "When the economy becomes a political issue, discussing economics without addressing political reform is often because the rulers aim to maintain the stability of the existing power structure while avoiding the threat that political liberalization poses to their rule. However, this approach typically results in economic problems being left unresolved at their core, leading the economy to gradually decline."