The China Model Falters

National Review Online

Tuesday, April 21, 2026

 

As sour as Americans are about the current economy, they should be profoundly grateful they don’t have China’s instead.

 

Headlines can be misleading. Last week, Chinese GDP figures came in better than expected, on track for 5.3 percent economic growth. But nearly all that growth is fueled by Beijing’s leviathan state. Consumer spending is weak, hurt by falling property values, and net exports are down. To compensate, the CCP is pouring money into government-run railroads and infrastructure projects.

 

Zoom out in time, and China’s economic picture looks even bleaker. The nation saw explosive growth over the last several decades, rising to the second-largest economy in the world behind the United States. It became conventional wisdom in the economics profession that China would overtake the U.S. economy by 2030. New York Times columnist Thomas Friedman yearned to adopt Beijing’s model, if only for a day.

 

That dogma is now undone. China’s GDP has barely budged in the four years since the pandemic, compared to its previous expansion. The Chinese economy was 78 percent of the size of the United States’ in 2021; that share had fallen back to 64 percent in 2024. While American equity markets have been on a tear during the same period, Beijing’s have shriveled.

 

External shocks cannot fully explain the slowdown. China faced higher energy costs after the invasion of Ukraine but supplemented its supplies by purchasing sanctioned Russian fuel at a discount. Exports to America have collapsed due to President Trump’s tariffs, but only in the last year.

 

Rather than a short-term contraction, China’s economic slump appears to be caused by structural forces. Household consumption and private-sector investment have stalled out. Exports to the entire world — not just the United States — are stagnant.

 

That has left government spending as the only remaining engine of growth, largely through the “investments” of state-owned enterprises. Unfortunately, the Chinese people are not too interested in what they have produced. The CCP spent trillions of dollars to inflate a property bubble, constructing tens of millions of homes that now lie vacant in “ghost cities” where no one wants to live. Excessive borrowing to finance state-ordered projects with lackluster returns has left Chinese companies and local governments in a severe debt crisis.

 

French economist Jean-Baptiste Say said that supply creates its own demand. That may be true, but only in market-based societies where firms that don’t serve genuine human needs go out of business. China, by insulating firms from profit-and-loss signals, has subsidized commercial failure on an epic scale. In doing so, the state diverted labor and resources from countless entrepreneurial endeavors that could have improved real lives.

 

This should mark the end of the so-called Beijing Consensus, coined in 2004 as an alternative to the free-market prescriptions for growth that enabled billions to escape global poverty. Instead of stable rules and unconstrained decision-making, it promised state-driven prosperity through a “ruthless willingness to innovate and experiment” and a “lively defense of national borders and interests.” In practice, all that meant was centralized control over Chinese society’s wealth and opportunity. Individuals were made to advance the CCP’s desired ends, not their own.

 

Insofar as the Chinese model succeeded, it was attributable to a shift away from collectivism and toward liberalization and private property. The CCP’s resurgent Leninism — the systematic elevation of some industries, the obliteration of others on a whim — was always an economic drag, not a competitive edge.

 

In its 21st-century contest against China, the United States has one great advantage: Our model works, and theirs doesn’t. Economic liberty, for all its messiness, still has no superior. American policymakers would be foolish to trade it in for the industrial statism that has met a dead end in Beijing.