Western hedge funds, banks and short sellers are targeting China, Hong Kong, and South Korea. As geopolitics is proliferating in Asia, weaponization is spreading to markets.

China’s slowing economy has fueled a broad range of takes on why Asia’s dominant power is losing its growth trajectory. Whatever the real reason is, China’s regulatory crackdowns seem to be digging a deeper hole to fall into.

The narrative that China’s economy is nearing its peak – or has already reached it – has taken hold in Western media. But if you read the doomsayers’ analyses carefully, you will find that many of the reasons they give for their bleak assessments are not new. On the contrary, they tend to highlight precisely the same challenges that economists and commentators have been harping on for at least a decade or longer. If China was not sputtering then, why should we believe it is now?

China’s economic performance over the last year has been disappointing – so much so that some observers argue that growth has already peaked, and that it is all downhill from here. But it is far too soon to write off China’s economic resilience.

China must transition away from export-driven growth, particularly real estate sector, and focus more on domestic consumption, green technology and strengthening its social safety net.

Three major issues make things difficult at present, but the country is more likely to have higher growth after adjustments have been made. Supply-side reforms, fiscal support and a firm opening-up policy will be the keys to success.

Over the 45 years since the China-Japan Peace and Friendship Treaty, the economic scale of the two countries has shifted. In addition, their economic structures have evolved, moving beyond an era of asymmetric dependence to a new phase characterized by mutual reliance.

Forecasts are not in line with reality. China’s economy is doing better than some analysts believe. Yet, alternative strategies must be found. A multi-pronged approach will cover the void left by real estate adjustments and lead China’s economy to a promising future.

China’s economic performance has been inspiring considerable pessimism lately. In the second quarter of 2023, the Chinese economy grew by just 6.3% from a year earlier – a figure that is disappointing because of the low base in the second quarter of 2022, when pandemic restrictions were still suppressing economic activity. And in July, China’s consumer price index (CPI) entered negative territory for the first time since 2021, sparking fears of a deflationary spiral.

China's economic growth has slowed while American politicians continue to advocate for protectionism, which is concerning as history shows that free markets are key to prosperity. China's struggles underscore the need for more economic freedom, not less.