In a notable development that has captured the attention of China observers, Beijing has intensified its efforts to quell criticism of the country’s economic trajectory. This crackdown on dissent, particularly within the financial sector, has raised concerns about the transparency and resilience of China’s economic policies. The recent surge in censorship, especially in the realm of financial news, has been marked by a broader crackdown in 2024. China’s Ministry of State Security has taken to its official WeChat account, urging citizens to disregard what they deem as “false narratives” about the economy, while simultaneously warning of increased security measures to suppress any negative discourse.
A prominent figure silenced in this ongoing suppression is Chen Shouhong, a respected Chinese economist known by the moniker “Ge Long.” Mr. Chen, the founder of Gelonghui, an influential online platform dedicated to disseminating information about global investments, holds a Ph.D. in finance from Zhongnan University of Economics and Law. His Weibo account, boasting an impressive 377,000 followers, was abruptly suspended on February 23, with Weibo citing a violation of relevant laws and regulations. This abrupt suspension has fueled speculation about the lengths to which Beijing is willing to go to control the narrative surrounding its economic challenges.
In a Weibo video released last fall, Mr. Chen courageously outlined three primary reasons for China’s economic crisis. Unsurprisingly, the video was swiftly removed by Chinese Communist Party (CCP) censors. Despite the challenges he faces, Mr. Chen’s credibility remains intact, bolstered by his 25 years of experience in both domestic and foreign investment. Currently serving as the Chairman and CEO of Gelonghui Information Technology (Group) Co., Ltd., Mr. Chen’s insights carry considerable weight within economic circles.
Mr. Chen’s concerns revolve around the CCP’s economic policy of “dual circulation.” He has expressed apprehension about the potential adoption of a trajectory leading to “internal and external isolation and closure.” This approach, as he warns, could result in the Chinese economy relying solely on internal circulation, leading to a myriad of potential consequences.
Delving into the specifics, Mr. Chen’s analysis focuses on the aspects of “external circulation,” particularly international trade and investment. He highlighted three critical components: tourists, airline flights, and capital. These components, he explained, constitute the interplay between supply and demand within the international industrial chain, encapsulating what he terms as “external circulation.” In contrast, “internal circulation” pertains to the domestic cycle of supply and demand.
Tourism, a significant driver of economic activity, has witnessed a substantial decline, especially in foreign visitors to China. Mr. Chen highlighted a staggering 98.6% decrease in foreign travelers, from 3.7 million in the first quarter of 2019 to a mere 52,000 in the corresponding period of 2023. This dramatic decline, coupled with the departure of a sizable expatriate population from cities like Shanghai, paints a bleak picture of China’s international appeal.
Adding to the apprehension is the redirection of foreign investors to alternative markets such as Mexico, Vietnam, India, and Indonesia. The repercussions of this trend are already manifesting in the reduction of flights between the United States and China, a key indicator of the economic ties between the two nations. Before the pandemic, there were approximately 1,200 flights per month, whereas now, there are only about 70 U.S.–China flights each month.
Frank Xie, a professor of business at the University of South Carolina’s Aiken School of Business, provided additional insights into China’s economic situation in a recent interview. He emphasized the interconnected nature of reduced foreign visitors, flights, and capital flow, attributing the decline to the severing of economic ties with Europe and the United States. Mr. Xie argued that the CCP’s suppression of information and dissent, framed under the guise of national security, has further deterred foreign investors. The withdrawal of foreign firms that evaluate and research China has left investors without crucial information, impeding their ability to accurately gauge the true state of China’s society and its economy.
Examining the reduction in foreign investments, Mr. Chen highlighted a significant drop from $101.2 billion in the first quarter of 2022 to a mere $4.9 billion in the second quarter of 2023. This staggering decline, the lowest since the 1998 Southeast Asian fiscal crisis, underscores the challenges facing China’s economic landscape. Moreover, data on foreign currency funds raised in China revealed a reduction of over 40% from 2021 to 2022, with a further decline of more than 87% by number and 57% by value in the first half of 2023.
Mr. Chen emphasized the core elements of economic development—people, logistics, and capital flow—arguing that all three have contracted in the external cycle. While a shrinkage due to the pandemic might offer a chance for correction, if the decline is driven by trade wars and geopolitical tensions, the outlook is considerably more pessimistic. This could signify a long-term structural reversal in the Chinese economy.
Notably, Mr. Xie provided a comprehensive perspective on the extent of China’s economic decline, estimating it to be as severe as “-5, -6 percent.” He pointed to the CCP’s retrogressive measures, including its suppression of information, technology blockade, and broader geopolitical tensions, as major contributors. These factors, he argued, have led to China becoming the “abandoned child of the international community,” isolated both economically and politically.
Contrary to the CCP’s claims of economic growth, Mr. Xie contended that the three driving forces of the Chinese economy—exports, investment, and consumption—have all stalled. He questioned the veracity of the reported 5.2% growth, attributing it to deceptive practices. With China’s population decreasing and its labor force diminishing, the challenges facing the economy are substantial. In Mr. Xie’s view, China’s economy is regressing to its situation before joining the World Trade Organization in 2001, and this economic decline is anticipated to persist until at least 2025. As China grapples with these economic challenges, the international community watches closely, assessing the potential implications for global markets and diplomatic relations. The interconnected nature of the world economy means that shifts in China’s economic landscape can reverberate globally. It remains to be seen how Beijing will navigate these challenges and whether there will be a shift in its economic policies to address the concerns raised by experts like Chen Shouhong and Frank Xie. The coming years are likely to be critical in determining the trajectory of China’s economic future and its place on the global stage.