Starmer risks becoming another Westerner who has swallowed yesterday’s story of China

The Prime Minister should not be misguided – Beijing is already in economic decline Daily Telegraph 30/01/26 Sir Keir Starmer is late to the Chinese economic miracle. Hyper-growth was already on borrowed time as far back as 2010, undermined by debt saturation and the insidious long-tail effects of the global financial crisis.

China’s share of world GDP has fallen for the last four years at market exchange rates. Capital Economics expects it to fall again this year, touching lows seen almost a decade ago. China’s output has already fallen back from three quarters to two thirds of US levels. It will not surpass the US over the next half century – assuming that Congress and the American people act in time to halt the dangerous buffoonery and predatory wag-the-dog wars of Donald Trump. Talk of a superpower sorpasso is now just a relic of past hubris. Britain’s Prime Minister should by all means be visiting Beijing to build a “more sophisticated relationship”. The UK and China are on the same side in the electrotech revolution, both pitted against the counter-revolutionary nexus of fossil energy states – arguably the most critical line of global cleavage for the next 20 years. But Sir Keir should not be there as a misty-eyed groupie, another Westerner who has swallowed yesterday’s story of China’s unstoppable rise and who is willing to bend too far to secure a largely illusory prize. It is illusory because communist China is pursuing a mercantilist policy of strategic autarky and one-way trade in much the same way as the Qing Dynasty before it. China’s trade surplus hit a record $1.2tn (£870bn) last year. Goldman Sachs says the surplus has reached 1pc of global GDP, the highest ever by any nation in known economic history. It is an even larger percentage than during the China Shock 1.0, which so destabilised the world economy in the early 2000s and so pauperised blue collar workers in Western democracies. China is doubling down on its worst pathologies. A full two decades after the regime promised to curtail extreme over-investment – and instead let the Chinese people enjoy the fruits of their labour – it is still building more excess plant and manufacturing capacity that the world cannot absorb. This has pushed its investment ratio off charts to 40.5pc of GDP. Other Asian tigers never came close to this level. “Economic growth is being powered almost entirely by investment, despite diminishing returns and escalating debt,” says Mark Williams, head of Asia at Capital Economics. He expects China’s true rate of trend growth to fall to 2pc by the late 2020s. Documents from the Communist Party School leave no doubt that the purpose of this maniacal industrial strategy is to mobilise technological change to overthrow the capitalist global order – but while this goal is rooted in modern Marxist doctrine, we could almost be talking about the early 1840s. As America’s John Quincy Adams wrote at the time – in defence of Britain – the First Opium War was not about opium but rather about the refusal of China to “hold commercial intercourse with the rest of mankind upon terms of equal reciprocity”. China was exporting but refusing to import, sucking the world’s silver currency into a deflationary black hole. Sound familiar? Achieving a high trade surplus is not itself a measure of economic success and it is fully compatible with slow economic decline. That is now the likely fate of China. One of the two most obvious is that Xi Jinping, the president of China, has reversed the great opening of the Deng Xiaoping era, which is what unleashed the entrepreneurial dynamism of the Chinese people and led to the success stories of Huawei, JD.com, Tencent and Alibaba. DeepSeek is newer but came out of a hedge fund building artificial intelligence for algorithmic trading, not the state. However, the biggest single reason for China’s coming decline is the least understood: the Communist Party has concentrated all its efforts on the urban elites and on supremacy in prestige technologies. It has gravely neglected the human capital of the rural poor and the second-class citizens of the feudal hukou system, who will be needed to sustain a modern digital economy. Scott Rozelle, the US development economist, has spent the last 40 years studying this other forgotten hinterland with a team of field workers. Anybody who still thinks that the country is heading for world domination should read his book “Invisible China: How the Urban-Rural Divide Threatens China’s Rise”, co-written with Natalie Hell. Some 64pc of China’s population was until very recently classified as “rural” under the country’s hukuo system, an internal apartheid with aspects of legal serfdom. Once rural, you stay legally rural and that shapes your whole life chances. Birthrates have long since collapsed in Shanghai, Beijing and the rich cities of industrial China – which means that three quarters of China’s young children have been growing up in this giant ghetto, condemned to sink schools, primitive healthcare and bad nutrition. “My research team has found that over half of rural babies are undernourished and more than half of toddlers are so developmentally delayed that their IQs may never exceed 90,” Rozelle says. Forty per cent of school children have intestinal worms in parts of Southern China. As Rozelle shows, in case after case, few emerge from these backwaters of deprivation with the cognitive skills and adult health required for modern technology – the sine qua non for China to clamber up the development ladder in the way that Japan, Taiwan and Korea were able to do at crucial moments of their modernisation. The hukuo children of China’s 300 million migrant workers cannot go to urban schools or access health care and state services. They are usually left behind in the villages, to a mixed fate. The result is that Chinese youth aged 25-34 are near the bottom of the world league for average educational attainment. Barely a third finish school. No country has ever broken out of the middle income trap with such low levels. It helps to explain why China’s productivity growth has stalled or even gone negative based on proxy measures of “true” GDP. Beijing, pricked by criticism and sensing the danger, is belatedly doing something about this – but it is too late. These damaged children are now damaged adults in the work force. It takes 45 years to run through the lifetime work cycle. The mystery is how a Maoist-Marxist regime could have made such a colossal error, worse even than the one-child policy in its economic effects. It has created a split society where the elite is world class, with universities rivalling the best of the West. Australia’s Strategic Policy Institute says China leads research in 37 of 44 critical technologies that it tracks. China is competing toe-to-toe in nuclear fusion, quantum computing, robotics and across the gamut of the Fourth Industrial Revolution. It has run away with advanced clean-tech (for now). It has developed three times as many novel medical drugs as the EU. But the larger masses of invisible China have been left behind and that will be an immense drag on the country through the next 30 to 40 years. So yes, let us have cordial relations and better trade with China – but not in the misguided belief that China is the economic future and the only game in town. It ain’t.