Two Chinas inhabit the American imagination: one is a technology and production and supply power that is ready to lead the world. The other is an economy that is about to collapse.
Each reflects a real aspect of China.
One China Laten We call the Hopeful China-Defarts determined by companies such as the AI-start-up DeepThe electric vehicle giant Byd and the technical powerhouse Huawei. They are all innovation leaders.
Jensen Huang, the chief executive of the chip giant of Silicon Valley Nvidia, said China was “not behind‘The United States in the development of artificial intelligence. Quite a few experts have stated that China would dominate the 21st century.
The other China – Gloomy China – tells a different story: slow consumer spending, rising unemployment, a chronic home crisis and a business community that is scrapping for the impact of the trade war.
President Trump, trying to negotiate a resolution of a trade war, must take into account both versions of the geopolitical rival.
The commitment has never been higher to understand China. It is not enough to be afraid of the successes, or to take comfort in his economic hardships. To know that the largest rival in America must see how the two Chinas can co -exist.
“Americans have too much imagined notions about China,” said Dong Jielin, a former Silicon Valley director who recently returned to San Francisco after having spent 14 years in China in the country’s scientific policy and the technology of the country. “Some of them hope to solve American problems with the help of Chinese methods, but that will clearly not work. They do not realize that China’s solutions are in a lot of pain.”
Just like the United States, China is a huge country full of inequalities: coast versus the interior, North vs. South, urban versus rural, rich vs. Poor, state -owned companies versus private sector, Gen X vs. Gen Z. The prevailing communist party is full of contradictions. It calls socialism, but returns from giving his citizens a strong social safety net.
The Chinese are also struggling with these contradictions.
Despite the trade war, the Chinese Tech entrepreneurs and investors with whom I spoke in recent weeks were more cheerful than in the past three years. Their hope started with Deepseek’s breakthrough In January. Two venture capitalists told me that they were planning to come from a period of hibernation they started after Beijing’s performance in the technology sector in 2021. Both said they wanted to invest in Chinese AI applications and robotics.
But they are much less optimistic about the economy – the gloomy China.
The 10 managers, investors and economists I interviewed said they believed that China’s progress in technology would not be sufficient to get the country out of his economic malaise. Advanced production makes up about 6 percent of China’s output, much smaller than real estate, which contributes about 17 percent of the gross domestic product, even after a sharp delay.
When I asked them if China could beat the United States in the trade war, nobody said yes. But they all agreed that China’s pain threshold was much higher.
It is not difficult to understand the fear that is felt by Americans who are frustrated by converting and producing their country’s struggle. China has built more High-Speed Rail Lines than the rest of the world, more deployed Industrial robots Per 10,000 production employees than any country except South Korea and Singapore and now leads worldwide in electric vehicles, solar panels, drones and various other advanced industries.
Many of the most successful companies in China have won resilience through the economic decline and are better prepared for the bad days that are in the coming days. “They have been suffering for a long time,” says Eric Wong, the founder of the New York Hedgefonds Stillpoint that visits China every quarter, referring to the cost-saving efforts of the Trump administration known as the efficiency of the Department of Government Efficiency. “For comparison: the US has long been life excess.”
But while we wonder about the so -called miracles of China, it is necessary to ask: at what costs? Not only financially, but also human.
The top-down innovation model of China, highly dependent on government subsidies and investments, has proved both inefficient and wasting. Just like the overview in the real estate sector that caused a crisis and erased a large part of Chinese household wealth, excessive industrial capacity has deepened the imbalances in the economy and asked questions about the sustainability of the model, in particular when wider conditions worsen.
The industry of electric vehicles shows the power of the two Chinas. In 2018 the country had nearly 500 EV -makers. By 2024, about 70 stayed. One of the victims was Singulato Motors, a start-up that yielded $ 2.3 billion from investors, including local authorities in three provinces. For more than eight years, the company did not deliver any car and requested bankruptcy in 2023.
The Chinese government tolerates waste investments in its chosen initiatives, which helps the overcapacity of fuel. But it is reluctant to make the type of substantial investments in rural pensions and health insurance that would help to increase consumption.
“Technological innovation alone cannot solve the structural economic imbalances or cyclic deflatory pressure of China,” said Robin Xing, the China economist at Morgan Stanley, in a research bill. “In fact,” he wrote, “recent technological progress can strengthen the trust of policy makers in the current path, which increases the risk of incorrect allocation of resources and capital.”
The obsession of Chinese leadership with technological self -reliance and industrial capacity does not help the biggest challenges: unemployment, weak consumption and dependence on export, not to mention the home crisis.
The urban unemployment rate of China is officially 5 percent, excluding unemployed migrating employees. Youth unemployment is 17 percent. The real numbers are supposed to be much higher. This summer alone, the Chinese colleges will graduate more than 12 million new job seekers.
Mr. Trump had no wrong proverb Closing factories and people lose their jobs in China.
In 2020 Li Keqiang, then the prime minister, said The foreign trade sector, directly or indirectly, was good for the employment of 180 million Chinese. “A decline in foreign trade will almost certainly hit the labor market hard,” he said at the start of the pandemic. Rates can be much destroying.
Beijing is play The effect of the trade war, but while negotiators found conversations with their American counterparts last weekend, the impact was clear. In April, Chinese factories experienced the best monthly delay In more than a year while shipments to the United States immersed 21 percent of a year earlier.
All economic fallout will be played by people like a man with whom I spoke, with the surname Chen, a former university librarian in a megacity in South China. He asked that I did not use his full name and where he lived to protect his identity against the authorities.
Mr. Chen lives in the gloomy China. He stopped taking the acclaimed high -speed trains because they cost five times as much as a bus. Flying is often also cheaper.
He lost his job last year because the university, one of the best in the country, was confronted with a budget deficit. Many institutions run through the state had to let people go because many local authorities, even in the richest cities, are deep in debt.
Because he is in the late thirty, Mr. Chen is considered Over -old For most jobs. He and his wife had given up to buy a house. Now with the trade war he expects the economy to weaken further and that his work perspectives will be dimmer.
“I have become even more careful with expenses,” he said. “I weigh every cent.”
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