In recent days there's been a spate of high-profile press headlines and news stories pointing to seeming evidence that the U.S. is winning the trade war with China. Two examples on the economic side suffice: “China Loses Status as World's Second-Largest Stock Market Amid Trade War with U.S.,” which focused on the fall of the total value of Chinese equity shares being traded compared to those on Japan's stock market, and “The Chinese Economy Starts to Feel Impact of U.S. Tariffs,” which, in part, pointed to slowing growth of China's economy.
And in the political realm there was this headline: “As China's Woes Mount, Xi Jinping Faces Rare Rebuke at Home,” which reported on an unprecedented strikingly transparent paper published by the noted Chinese constitutional scholar, Xu Zhangrun of Tsinghua University, openly expressing his concerns about the “totalitarian” tendencies of Chinese leader Xi Jinping.
As any decent economist will tell you, it's critical to distinguish between correlation and causation. Much of the current news stories on the impact on China of its trade war with the U.S. score a very low grade in this regard.
China has registered tremendous rates of GDP growth for years, which do reflect genuine economic successes spurred on by truly innovative reforms—although these data are taken with large grains of salt by any serious observer of China in light of the questionable precision of the government's official statistics.
But there's a dirty little secret: deep-seated economic troubles have abounded within China for some time, indeed for decades—or at least they were evident as far back as the early 1990s, when I began working there.
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