Censored Economist Explains Why Chinese Economy Is Flailing

A Juneyao Air plane is seen at the Shanghai Pudong International Airport in Shanghai on Feb. 12 2024. Photo by Hector Retamal / AFP

In a move that has China observers concerned, Beijing is cracking down on criticism of China’s economy. Last year there was a notable increase in the censorship of financial news articles, and the crackdown broadened in 2024, with China’s Ministry of State Security, in a series of posts on its official WeChat account, begging citizens not to listen to “false narratives” about the economy and warning of increased efforts by security agencies to shut down negative talk about the economy.

Among those calling out China’s declining economy, and being censored for it, is Chen Shouhong, a Chinese economist known for his insights into global investment trends. Commonly known as “Ge Long,” Mr. Chen is the founder of Gelonghui, an online platform for information about global investments. In a Weibo video last fall, he highlighted three reasons why the Chinese economy is in crisis. The video, not surprisingly, was quickly removed by Chinese Communist Party (CCP) censors.

A Feb. 23 fact-check by The Epoch Times found that Mr. Chen’s Weibo account, with 377,000 followers, had been suspended. The explanation provided by Weibo simply stated: “The user is currently under a ban due to violation of relevant laws and regulations.”

Mr. Chen’s credibility is solid. He holds a Ph.D. in finance from Zhongnan University of Economics and Law, he currently serves as chairman and CEO of Gelonghui Information Technology (Group) Co., Ltd. With 25 years of experience in both domestic and foreign investment, his perspectives carry significant weight within economic circles.

Mr. Chen looked at the situation from three aspects, in light of the CCP’s economic policy of “dual circulation. He expressed apprehension about the prospect of China adopting a path of ”internal and external isolation and closure.“ He cautioned that such a trajectory could result in the Chinese economy becoming an ”isolated economy forced to rely solely on internal circulation.”

Toward the end of 2023, discussion swirled within online communities regarding the censorship of Mr. Chen’s video. Released on his personal media channel, “Talking About Stocks Today,” the video discussed three critical aspects of the Chinese economy’s “external circulation,” namely international trade and investment. Those aspects are tourists, airline flights, and capital.

External circulation, as he explained it, denotes the interplay between supply and demand within the international industrial chain. Internal circulation signifies the domestic cycle of supply and demand.

Tourists Stay Away

Mr. Chen’s analysis focused on the dwindling number of foreign visitors to China. He noted that in the first quarter of 2019, China welcomed 3.7 million foreign travelers, whereas in the corresponding period of 2023, the figure plummeted to a mere 52,000—a staggering 98.6 percent decrease.

A large proportion of those tourists hail from Hong Kong and Macau, leaving an even smaller percentage of tourists from the rest of the world.

Mr. Chen cautioned that this dearth not only spells trouble for the inbound tourism industry but also evokes parallels to a quasi-seclusion reminiscent of the 1970s, in which external engagement wanes not due to restrictions, but rather due to a lack of interest.

Adding to the apprehension is the redirection of foreign investors to countries like Mexico, Vietnam, India, and Indonesia, Mr. Chen said. The repercussions of this trend are far-reaching.

A notable example was Shanghai, which was home to a sizable expatriate population. The city saw many foreign residents leave in the aftermath of zero-COVID lockdowns and other measures. According to a report by the Shanghai chapter of the EU Chamber of Commerce in China, the city lost about 25 percent of its German population and 20 percent of its French and Italian residents.

Shanghai residents spoke with The Epoch Times about the impact of the exodus. One Shanghai resident, Chen King (a pseudonym), said in a Feb. 21 interview that, before the pandemic, she would sometimes see so many foreigners in Shanghai’s central Huangpu District that she felt like she was abroad. Now she laments the city’s much smaller foreign presence, a taxi-driver friend, she said, picks up foreigners just once or twice a week now, whereas pre-pandemic, he was driving them on a daily basis.

Another Shanghai resident, who asked not to be named, highlighted the deep psychological toll of China’s zero-COVID policies, which instilled fear among locals and foreigners alike.

Few Flights to China

Mr. Chen noted the huge drop off in air travel between the United States and China. Pre-pandemic, there were about 1,200 flights between the two countries each month. Now, there are only about 70 U.S.–China flights each month.

Over the past 70 years, 70 percent of China’s trade surplus in foreign trade production has come from the United States. What does this imply in the absence of the epidemic, with only a few flights between China and the United States per day?

Frank Xie, a professor of business at the University of South Carolina’s Aiken School of Business, analyzed China’s economic situation in an interview with The Epoch Times on Feb. 22. The reduction in foreign visitors, flights, and capital are all connected, he said. They are related to the severing of the Chinese economy from that of Europe and the United States, the transfer of the entire industrial chain, and the withdrawal of Western capital from China.

“The CCP’s retrogressive measures, its suppression methods used in Hong Kong and Xinjiang, are also visible to foreign tourists. Therefore, businessmen don’t go, and tourists dare not go.”

Mr. Xie noted that in addition to businessmen and tourists, many of those traveling back and forth to China from the United States have been students and those involved in academic exchange programs. As academic exchange programs have diminished due to the pandemic and geopolitical tensions, this has significantly impacted the number of flights as well.

Reduced Foreign Investments

The third factor discussed by Mr. Chen was the reduction in foreign investments. In the first quarter of 2022, he said, the direct investment of foreign companies in China was $101.2 billion; however, in the second quarter of 2023, that number took a staggering drop to only $4.9 billion, its lowest level since the 1998 Southeast Asian fiscal crisis.

Another set of data shows that in 2022, 114 foreign currency funds were raised in China, a reduction of more than 40 percent from 2021. In the first half of 2023, there were only 87 instances of foreign currency funds investing in China, down from 2022 more than 87 percent by number, and more than 57 percent by value. In the first half of 2023, private equity funds focused on China raised only $1.4 billion.

Mr. Chen named three core elements in economic development: people, logistics, and capital flow. The key data in the external cycle mentioned above have all contracted. If the shrinkage is due to the pandemic, there is still a chance for correction.

However, if the shrinkage is due to trade wars and geopolitics, the outlook is much more pessimistic for the current generation, owing to a long-term structural reversal in the Chinese economy.

The analyst also emphasized that China has been one of the biggest beneficiaries of globalization over the past few decades. If China moves toward “internal and external isolation, internal and external blockades,” and its economy becomes an “island economy” again, the consequences will be unimaginable. If fundamental changes are not made, he said, “we will suffer huge losses that are difficult to make up for.”

Mr. Xie attributed the drop in foreign investment in part to the CCP’s suppression of information and dissent under the guise of national security. Some foreign firms that evaluate and research China have been forced to withdraw, he said. Without the information from these firms, foreign investors are flying blind, so to speak. Unable to gauge the true state of China’s society and its economy, they are afraid to invest.

“Since 2017, the United States has continued its tariff war against the CCP ...  After 2020, there has been a technology blockade. As the world’s factory, China has closed down,” Mr. Xie said.

Mr. Xie feels that “the CCP’s retrogressive measures, its hostility towards foreign businessmen, coupled with the Western containment of the CCP, [the] technology blockade, and the overall confrontation in politics, economics, military, culture, education, and all other aspects, have led to the CCP becoming the abandoned child of the international community, an island.”

He believes the extent of Chinese economic decline is much worse than reported, perhaps as much as “-5, -6 percent.” He added, “I think China’s economy is now overall regressing to [its] situation before joining the World Trade Organization in 2001, and the economic decline will last at least until 2025.”

The CCP continues“boasting and deceiving” about its economic growth last year, Mr. Xie said, yet no one—not even the Chinese people—believes that the Chinese economy grew by 5.2 percent.

“The three driving forces of the CCP’s entire economy—exports, investment, and consumption—have all stalled ... China’s population is decreasing, and its labor force is also decreasing,” he said. Given those factors, “How could its economy still grow like this?”