China accomplished this without many attributes that economists have identified as being crucial for growth—such as a well-functioning financial system, a strong institutional framework, a market-oriented economy, and a democratic and open system of government. Until the COVID-19 pandemic rocked it back on its heels, the Chinese economy powered through periods of domestic and global turmoil seemingly unscathed.
But detractors have long argued that China’s economic collapse was imminent, pointing to numerous fragilities. The country’s growth has been powered by investment in physical capital, especially real estate, that has been financed by an inefficient banking system. With domestic debt levels high and rising, the property market unraveling, and the labor force shrinking, some analysts say the day of reckoning has finally arrived.
They are likely wrong.