by Gary Alexander
July 21, 2026
Two months ago, on May 19, after President Trump met Xi Jinping, China’s dictator-for-life (“Xi who must be obeyed), I asked “Is China’s Growth Dynamo Now Running on Empty?” I tentatively answered, “yes,” but now I can say it with more evidence: China has not repealed the business cycle, even though they have not seen a recession in 50 years, since Mao-Tse Tung died and the Cultural Revolution ended.
Amazingly, China has not admitted having a recession (two consecutive quarters of negative growth) since 1976. For most of those years – especially from 1983 to 2010 – China grew by at least 9% a year each of those 28 years, and at least 7% each year from 1991 to 2012 – or so they tell us – but when Xi took over in 2012, China’s growth rates were soon cut in half, enduring a slow-motion decline since then.
And now, last week, China reported its growth rate dipping to the lowest level since late 2022, when China was hip-deep in lockdowns due to a second wave of severe COVID cases. This recent decline is due in large part to slower consumer spending, which in turn is due to a deflationary real estate market and youth unemployment of around 16%, in a nation which suffers a shortage of new, younger workers.
The day after this new Chinese economic shocker came out, economist Joe Sternberg wrote a Wall Street Journal op-ed, titled: “China’s Economy is in Worse Shape Than You Think.” He began like this:
“You know something is awry in China’s economy when not even the Communist Party can claim things are going according to plan. Witness this week’s economic-growth data for the most recent quarter, which on closer inspection are shockingly bad: Beijing’s statisticians on Wednesday said the gross domestic product grew 4.3% year-over-year in inflation-adjusted terms in the April through June quarter. China’s economic data are notoriously prone to fiddling for political purposes. And this March, the Communist Party set a GDP growth target range of 4.5% to 5% for the year, its most pessimistic since the 1990s.” – WSJ, July 16, 2026.
Sternberg pointed to “accumulating evidence that the country’s true GDP growth rate may be zero, or that the economy is in outright recession….Measures of investment are in free fall: Fixed-asset investment has declined 5.7% year-to-date and real-estate investment is down 18%….If none of the components that go into GDP calculation are increasing to any great degree and China isn’t consuming energy as a growing economy would, it’s fair to wonder if even the anemic GDP figure announced this week is confected.”
One reason domestic consumption is dipping so far is the Chinese put the bulk of their savings into real estate, aka “empty buildings in ghost towns,” in hopes of future expansion. Xi also issued “consumption subsidies” (similar to the Obama-era “cash for clunkers” or Biden’s subsidies on EVs), so Sternberg says, “domestic consumption is unlikely to revive until the real estate market has found its bottom. Until that point, households will continue to experience declines in net worth,” which will dampen retail spending.
And now, China’s demographic doomsday clock makes these economic problems more explosive.
In 2024, Chinese deaths outnumbered births for the first time, signaling a peak population point, after which China is expected to decline for at least the next generation, until 2050 at the earliest, even if they start mass-producing babies now, which newly spoiled urbanized Chinese workers are not likely to do.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Did China’s 1976 “Mandate of Heaven” Abolish Recessions – for 50 Years (So far)?
What happened to create this alleged miracle of recession-free super-growth for 50 years – if indeed the numbers are reliable? A lot is due to cheating – product piracy, floods of counterfeits, technological spying, huge deficit spending on roads to nowhere towns, and more. But the Chinese also believe their 50-year growth surge could be due to a heavenly mandate. The Chinese firmly believe a 1976 “Mandate of Heaven” led to the end of the Cultural Revolution, the death of their leaders, and heavenly eruptions.
What happened in 1976? First, the acting “vice president” of China, Chou Enlai, died in January. Mao died in September of that year. In between, Heaven spoke more loudly: On March 8, 1976, the largest meteor shower ever recorded fell on Jirin Province in Northeast China. In the summer, three earthquakes hit Northern China, destroying parts of Beijing and Tangshan, killing 665,000 and injuring 775,000. On July 28 (50 years ago next week), a magnitude 7.8 earthquake struck Tangshan in, Hebei Province, at 3:42 am, killing over 240,000 people and injuring more than 160,000, while making up to a million homeless.
After Mao died, the “Gang of Four” (including Mao’s widow) tried to take over, but they failed to gain traction, since they were largely blamed for the Cultural Revolution, the brainchild of Mrs. Mao. By late 1978, Deng Xiaoping emerged as leader. He was a champion of local capitalism under central Communist control, beginning with privatized farms and Special Economic Zones. The result of his reforms created the greatest economic growth and escape from poverty the world has ever seen, starting in 1979.
China’s phenomenal growth is now beginning to slow under the Iron Heel of its new Dictator for Life, Xi Jinping. Part of this is due to China’s old “one child policy,” from which the nation never recovered and is now paying the price, with massive armies of elderly and retired Chinese who can’t be supported by a shrinking number of young laborers. (This also puts limits on the future of “Made in China” products).
China’s 50-year growth surge raises a key question – implied in my title: Can a Communist-run economy fine-tune a half century of massive economic growth using “command and control” techniques, flying in the face of the proven historical dominance of capitalism in major Western nations in the last 250 years?
No Communist nation has ever grown this fast. Look at Cuba or side-by-side comparisons in two nations, each split in half, one side Communist, the other Capitalist – East and West Germany (1945-1990) then North and South Korea (since 1950). The nations are composed of the same people and same language, but two systems, in which capitalists (West Germany and South Korea) whipped their collectivist twins.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Unlike the U.S., China is surrounded by 14 (mostly unfriendly) neighbors, but it has no real “twin.” The closest comparison would be Japan – a nation which treated China brutally from 1931 to 1945 – and the major superpower of the last century – the United States. Japan soared economically until 1990, but then that nation’s economic dominance collapsed, while the U.S. gained greater dominance since 1990.
Which way will China go this century? – toward collapse, like Japan, or to greater dominance, like the U.S.? Demographics and the unavoidable laws of economics point to a long-term decline, projected here:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Can China’s economy weave magic and grow forever? Did Japan pull it off, in the past? Did Russia? No.
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
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About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20-years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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