China Faces a Host of Problems and the Olympics Haven’t Even Started

In summer 2008, the Beijing Olympics marked a big moment in China’s progress toward global power. With that spotlight came controversy; activists used the event to highlight the government’s human—rights abuses, but the event’s triumphalist pageantry illustrated the story of China’s rise toward prosperity and prestige for a world audience.

Since then, China’s ambitions have taken another leap forward. Under President Xi Jinping’s leadership over the past decade, China has gone from pushing for reform of the international system to helping guide that reform to making plans for leading it. In recent years, Xi has heralded a “new era” that will move China “closer to center stage” in global politics. He has presented China as “a new option for other countries,” an alternative to Western democracy, and he has outlined what he calls the “Chinese solution” for the world’s problems. Closer to home, China’s leaders mean for their country to tighten control of Hong Kong, to pressure Taiwan to stop resisting Beijing’s push for unification with the mainland, and to build military strength in the South China Sea.

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Yet the reality is that China’s rise was losing trajectory even before a more aggressive U.S. foreign and trade policy and the COVID-19 global pandemic. While Xi’s “China Dream” of prosperity has become reality for hundreds of millions of people, extending these gains to a population with rising expectations for a bright future won’t be easy. China is still considered a low-income country. It needs another generation of 6% to 7.7% growth in order for it reach Western level prosperity. Because the growth engines which have powered China forward over recent decades seem to be running dry, this goal seems almost impossible.

First, a reshoring of manufacturing away from China and advances in robotics have cut into China’s lower-wage advantage. Its demographics are disconcerting. China revealed that the country’s birth rates had fallen for the fifth straight year. The future will see a decrease in workforce, which will impact the growth. Also, that less number of workers will need to provide support for a rapidly growing elderly population. The state’s shift from a “one-child policy” to a “two-child policy” and now a “three-child policy” hasn’t helped. Xi has promised that China will achieve a “common prosperity” that reduces income inequality by redistributing wealth across regions, income groups and economic sectors. However, China appears to be becoming older before it is able grow in wealth.

China is also plagued by debt. It has placed a lot of its economic growth and dependance on property loans as well as other speculative investments. Many institutional borrowers have taken on large amounts of money and expect protection from the government if they are unable to repay. Xi knows China’s domestic tranquility, and its national security, depend on financial stability. To avoid a banking crisis and an economic crash, China’s government has tried to clean up the business of borrowing and lending. But the various fights in recent months over the fate of possibly “too-big-too-fail” companies, like the deeply indebted property developer Evergrande, make reform much easier to promise than to deliver.

Learn More The Beijing Olympics Will Be the Ultimate Test of China’s Zero COVID-19 Policy

For the 2022 Winter Games, China’s leaders have a more immediate problem. Throughout the pandemic, the state has sharply limited the number of COVID-19 infections within the country’s borders with a “zero-COVID policy.” It has used digital devices to track and trace infections, and its tight, highly centralized political control to enforce lockdowns of a large number of people. In 2020, this policy was among the world’s most effective, and helped China to be the only major economy to experience growth that year.

But not now. It’s much harder to build a fence around the Omicron variant, which is far more infectious if less dangerous for those who’ve been fully vaccinated. China has not yet developed its own mRNA vaccines.

China, as it prepares to take the Olympic spotlight by the ring, is now facing the highest transmissible COVID-19 form. Comparable to America and Europe it has a smaller number of people that have had previous infections treated or who have access the best vaccines. That’s why foreigners can’t attend the Games as spectators, and why domestic audiences will enter by invitation only. Over 20 million Chinese are currently in prison. This all happens at a time when economic slowdown is raging.

Fourteen years after China’s debut as Olympic host, the spotlight is getting much hotter.


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