China must be breathing a sigh of relief, now that the tariff demands of the U.S. have been put on pause. Much attention has been given to the impact of tariffs in this country, but there are many sources who don’t realize the ominous conditions currently in China: the country may be on the verge of collapse. Here’s one recent assessment:

When I write collapse, I’m not referring just to a financial meltdown. I’m referring to a broad-based social collapse that could call into question the rule of the Communist Party (CCP), which some historians refer to as the Peasant Dynasty. 

For years we have decried the machinations of China regarding the theft of our technology, their threats to invade Taiwan, the expansion of their military, and the influence they’ve developed with countries all over the world, including our own. They have become so desperate that Chinese espionage is difficult to disguise:

Last month, Newsweek reported that the Department of Defense had funded a Chinese-born researcher, Song-Chun Zhu, who at the time was openly transferring sensitive technologies to Chinese institutions, including those relating to artificial intelligence with military implications.

It was just the latest sign that China’s espionage has reached crisis proportions.

We are now discovering that the image of a successful and prosperous China is an illusion, and as they try to appear to be a top global competitor, there are indicators of collapse.

A major problem for China is that they are stuck in a “middle income trap.” Although they have grown the middle class from an annual income of $5,000 to $15,000, moving to a higher level would currently be nearly impossible:

It takes an extraordinary effort to break out of the middle-income trap. Only a few countries (Japan, Singapore, South Korea and Hong Kong) have ever accomplished it. The key is technology and high-value added production to replace low-value added assembly style production. China has not accomplished this. Most of China’s technology is stolen from the West. That’s not good enough, because the country you stole it from already has it and has already applied it efficiently. You have to invent your own technology and apply it before competitors are even aware. China has failed miserably at this.

As China inflates its gross domestic product, it is struggling to manage its debt. That situation prevents the country from growing economically. As a result, they are in deep trouble:

‘At a time when China needs friends because it’s not selling goods to the U.S., it is going out of its way to antagonize not just the Philippines, not just Taiwan, but also South Korea and Australia,’ [Gordon]Chang, a senior fellow with the Gatestone Institute, said on Mornings with Maria on Monday.

‘This shows that... this is end-of-regime conduct, because Xi Jinping, he can’t appear to be giving in to the U.S.,’ he added.

China’s vulnerability is not only demonstrated by their alienating other countries, but they are behaving defensively to try to hide their current dire circumstances:

‘[Xi] has configured the Chinese political system so that it is hostile. And also, because he’s been making the claim that China has surpassed the U.S., he can’t look dependent on trade with the U.S.,’ Chang explained. ‘And he certainly can’t look like he's talking to the U.S. under pressure.’

As the conditions in China worsen, China strives even harder to maintain an image of growth and progress:

China’s leaders are now reacting to a rapidly deteriorating situation. The economy, the motor of the country’s half-century rise, is failing. Gross domestic product did not increase 5.2 percent last year, as the National Bureau of Statistics officially reported. Growth—if indeed there was any—was about 1.5 percent, as the Rhodium Group estimated.

Since the official GDP announcement in January, there has been growing skepticism of Beijing’s reports of a robust expansion. China is plagued with symptoms of a sinking economy: deepening deflation, crumbling property prices, continuing debt defaults, a weakening currency, accelerating capital flight, and failing local governments. Falling population—the number of people peaked in 2021—does not help.

Here’s an analysis of the almost-stagnant numbers:

Consumers are cautious, not just about big-ticket items, but also everyday spending. The property sector is still under strain, dragging on household wealth and appetite. So even as goods pile up and prices drop, buyers aren’t stepping in with force.

This results in companies slashing prices to levels that damage profitability. The impact cascades: lower margins, tighter hiring plans, smaller pay packets. These outcomes aren’t theoretical—they’re already showing up in China’s data. Businesses are operating defensively, households are holding back and the loop is tightening.

Now that a pause has been put on the tariffs, negotiations will still continue.  The U.S. has substantially backed off of the exorbitant tariffs it had originally promised, and China is describing its satisfaction with the results of their meetings in Switzerland:

The U.S. and China ended high-stakes trade talks on a positive note on Sunday, with U.S. officials touting a ‘deal’ to reduce the U.S. trade deficit, while Chinese officials said the sides had reached ‘important consensus’ and agreed to launch another new economic dialogue forum.

Neither side released details after they wrapped up two days of talks in Switzerland. Chinese Vice Premier He Lifeng said a joint statement would be released in Geneva on Monday. Vice Commerce Minister Li Chenggang said it would contain ‘good news for the world.’

Whether this major shift in the tariff negotiations is sufficient movement to begin to save the Chinese economy, only time will tell.

Image: Free image, Pixabay license.