The Chinese economy is accelerating its self-destruction through “bullying Japan.

A large amount of real estate has become non-performing loans.

The Chinese government has clearly stated that it will stabilize employment for workers. At the same time, it is also emphasizing the strengthening of advanced technological development, such as artificial intelligence (AI) and robotics. This is contradictory, because if AI and robotics development advances, it could significantly take away workers’ jobs.

Kenji Minemura, a leading analyst of international affairs and senior fellow at the Canon Institute for Global Studies and director of the China Research Center, offers this analysis. The Chinese economy is sinking right now. The real growth rate of gross domestic product (GDP), which was around 10% in the late 2000s, has fallen to around 5% in recent years. There is no solution in sight to break out of the recession. Mr. Minemura continues his commentary.

What was surprising at the National People’s Congress (equivalent to Japan’s National Assembly), which was held until March 12, was that the GDP growth rate target for 2014 was lowered to “4.5% to 5.0%. This is the lowest level since the 1990s. Until last year, the government had set a target of “around 5%,” but it seems that it can no longer maintain its bullish stance. Some U.S. think tanks are predicting that “around 2%” is more appropriate in light of reality.

Setting a high target will cause distortions. In particular, local regions are suffering from severe fatigue. In order to meet their quotas, local governments are forced to continue real estate development without regard to profitability. However, the real estate investment rate reached 50% in the early 2000s, but now that the bubble has burst, there are no buyers. The large amount of real estate that has become “inventory” has become bad debt and is putting pressure on local economies.

AI is a double-edged sword

In the background is the dilemma of President Xi Jinping’s ‘one power.’ Xi, who in March 2006 abolished the term of office for state presidents, which had previously been “two terms of 10 years,” is an absolute figure.

The ‘growth rate target’ is practically a mandate from Mr. Xi. If a person with immense power tells you to do something, those around you will have no choice but to do it. In particular, Mr. Xi is promoting an “anti-corruption” policy. If one disobeys orders, he or she will be considered “corrupt” and may be purged. I believe that China’s economy, which has come to a standstill, is the result of the “ultra-powerful” regime of Mr. Xi.

One of the goals of the “Five-Year Plan” adopted at the National People’s Congress is to invest in new businesses such as AI, robotics, and quantum technology (see table for “Main Points”). On March 6, the Chinese government announced that it will expand AI-related industries to 229 trillion yen by the end of ’30.

The improvement of AI and robot technology is a double-edged sword for the Chinese economy. The five-year plan calls for an increase in the unemployment rate to about 30% by the end of 2010. The Five-Year Plan calls for creating jobs for migrant workers and young people from rural areas, where unemployment is worsening, and increasing their income to boost their spending power. Many of them are engaged in the manufacturing industry. However, AI and robots are beginning to take over jobs previously done by humans in the manufacturing industry. The Chinese government has announced that the unemployment rate for young people (aged 16-24) is around 16-18%, but in rural areas it is estimated to be over 50%.

Meanwhile, China has announced a watch list to strictly screen exports of both military and civilian goods under the guise of “involvement in improving military power” in Japan. The number of Japanese companies and organizations listed as banned or monitored exports is as high as 40 (see table). The recent acceleration of “Japan-bashing” has had the opposite effect on the Chinese economy. Many Japanese companies have factories in China and employ local people. Some of them have been rooted in the area for decades and are even providing technical training to their workers. If sanctions against Japan are strengthened, more and more jobs for workers will be lost. This will lead to the self-destruction of the Chinese economy.

The Five-Year Plan also sets a long-term goal of doubling per capita GDP by the year 35, compared to the year 20.

The Chinese government is offering subsidies ranging from over 10,000 yen to 440,000 yen if people buy new cars, home appliances, and other items. It may want to stimulate sluggish domestic demand. However, it is unlikely that so many people will replace their cars so frequently. In other words, it is a sign that they have no effective ideas. Without fundamental measures, China will not be able to achieve its goal of doubling its GDP by the year ’35.

China is bound by the Communist Party’s planned economy and likes to set long-term goals. But who can predict the future, with the outbreak of conflict between the US and Iran at the end of February? China’s recession is a natural consequence of the adverse effects of the ultra-powerful Xi Jinping regime.