The Telegraph: Xi Jinping’s economic model running out of road

China’s economy is facing mounting structural pressures, including a prolonged property crisis, heavy debt, weak domestic consumption, demographic decline and growing tensions over its export-driven growth model, according to an analysis by Charles Parton published by The Daily Telegraph on August 18.

Parton argues that the limits of China’s state-directed investment model are becoming increasingly evident, pointing to difficulties in the property sector and the financial strain facing local governments.

He says local authorities remain dependent on bank lending to sustain debt-heavy projects and state-backed businesses, potentially diverting resources away from more productive private-sector activity.

The analysis also highlights employment as a major challenge. Parton points to high youth unemployment and the need to create jobs for more than 12 million graduates each year. He argues that the government’s emphasis on automation and advanced technologies could create additional employment pressures if workers cannot acquire the skills needed for an increasingly technology-driven economy.

China is seeking to address some of these challenges through investment in what President Xi Jinping calls “new quality productive forces”, including artificial intelligence, biotechnology, quantum technologies and advanced materials. However, Parton notes that these sectors remain considerably smaller than the property industry and are unlikely to replace its economic contribution in the short term.

Another pillar of Beijing’s strategy is exports. China recorded a trade surplus exceeding £886 billion last year, according to the figures cited by Parton, with the surplus expected to increase further. The author warns that rising exports are prompting other countries to consider protective measures as Chinese subsidies and industrial overcapacity put pressure on domestic manufacturers.

Domestic consumption remains another weakness. Parton argues that household consumption accounts for a relatively small share of China’s economy compared with many other countries. He attributes the high household saving rate partly to limited social-security, healthcare and pension provision, as well as government policies that have prioritised investment and production over welfare.

The country’s demographic outlook adds to the difficulties. Both China’s overall population and working-age population are declining, potentially reducing domestic demand and making sustained economic expansion more difficult.

Parton also frames China’s economic problems as fundamentally political. He estimates that total debt could exceed 300 per cent of GDP and argues that resolving the debt burden will ultimately require decisions over whether households, companies or the state should bear the cost.

According to the analysis, the government continues to prioritise military development, technological advancement, industrial self-reliance and strategic competition with the United States. Parton argues that this approach limits the scope for a significant shift towards greater private-sector participation and household consumption.

The author concludes that China’s economic difficulties could have consequences beyond its borders, particularly for countries exposed to Chinese exports. He warns that Britain could face pressure from subsidised Chinese goods, excess industrial capacity and barriers to foreign companies operating in China.

Parton argues that greater economic dependence on China could also create strategic vulnerabilities for the UK, calling for stronger measures to protect British economic and national security interests.

The analysis reflects Parton’s assessment rather than an independent forecast of China’s economic trajectory. Nevertheless, it highlights a broader debate over whether Beijing’s state-led economic model can generate sustainable growth while addressing its debt, demographic and employment challenges.

By Aghakazim Guliyev