post-lockdown realities

1980s on the way to double-digit growth

leading public intellectual Sun Liping posits a new paradigm, the ‘neo-dual structure’, and foresees extended economic contraction

The end of COVID lockdowns on 7 December 2022 came as a huge shock, with authorities denying the possibility until the last minute. It was a moment of truth, a pause in Party censorship and propaganda. For a time, unorthodox, sceptical and even dissident viewpoints were aired and circulated (see box below). 

More upbeat economic performance in Q1 2023, as well as the tone-raising Two Sessions in March, put paid to the wave of truth-telling. But scepticism returned in Q2 in an understated demolition of current economic policy by critical theorist Sun Liping 孙立平.

In a few strokes, Sun sketches the ‘neo-dual structure’ he sees shaping PRC realities. Money circulates in the upper ‘national economy’ part, financing massive infrastructure, high tech, high-end manufacturing, military industry, SOEs, state employment, and more. Little flows around the lower part, a zone of falling incomes, job losses, debt stress, and souring expectations. A central oval bobs in the lower zone: representing exports, it shows how the mainly low-end products support the incomes of much of the public. With exports falling, incomes are declining, jobs are scarce, and consumption in this zone is drying up. The dotted line may move over time—likely down—and the portion of the national income the general public enjoys will shrink.

post-COVID scepticism

The most challenging thing for the PRC to achieve in 2023, asserted Liu Shouying 刘守英 Renmin University School of Economics, in ‘Saving the market after the war on COVID’, is ‘how to return to the market system’. Liu saw the three COVID years as a return to the planned economy and a ‘withdrawal from the market system’.

The PRC economy, warned Wei Jianing 魏加宁 State Council Development Research Centre, faces ‘zombification’: firms kept afloat by state subsidies, fail to make enough to survive independently. They deter investors in the economy and burden the state budget. The domestic and global economy is at risk, impacting national economic growth and people’s incomes. Without renewed reform, Wei predicts population size to be no advantage but a disadvantage. SOEs must be evaluated and reformed, he says.

Li Yang 李扬 CASS vice-president underscores symptoms typical of balance sheet shocks: non-financial economic entities‘ expect to weaken’ to varying degrees, and so choose to lie low. An increase in money supply and loose liquidity in the financial sector in 2022 was abnormal. Reducing revenue and growing expenditure, the sector increased deficits and debts. Risking a balance sheet recession, said Li, it has been hard-pressed to resolve the issue.

All three writers are, like Sun Liping, senior establishment intellectuals, veterans who began their careers in the later Deng Xiaoping era, a high tide of market reform. 

dismantling the export economy

Having broached the neo-dual structure in a talk in August 2022 before the COVID reversal, Sun revisited it in his keynote at the China Qianhai Entrepreneurs Summit in April 2023. Among heavyweight business leaders, scientists, scholars and investors, his critique, nominally addressing innovation, drew attention with paradigm-shifting viewpoints. As instigator and recipient, the PRC was engaged in ‘dismantling’ rather than ‘decoupling’. Its economy comprised a ‘neo-dual structure’ (read by some as a swipe at Xi’s ‘dual circulation’). 

‘We may be in for a not-so-short period of economic contraction,’ warns Sun. He gives three reasons

  • the PRC’s era of large-scale concentrated consumption is over 
  • the international context is ever more adverse
  • the pandemic has left deep scars

the coming of weak consumption 

How did the PRC economy reach the point of contraction? Sun Liping divides the post-1949 era into stages: pre-reform, when even food and clothing were in short supply; life lessons, in which people relearned ‘how to live’, i.e., by values that had been eroded in the Cultural Revolution; three main items, when economic growth sped up in the late 1980s, and popular needs grew to include a fridge, TV, washing machine. 

A fourth era followed of houses and cars, the PRC’s period of double-digit growth. In its wake is a surplus of houses. Auto production and sales, over 27 million in 2022, face a ceiling of about 30 million, threatening overcapacity. 

Last comes the homeownership era, after which the PRC is no longer catching up. And its decades-long era of large-scale consumption is over.

Fiscal revenue grew slower than GDP in the 1980s, notes Sun: incomes rose rapidly for the general public, allowing people to spend. Later, fiscal revenue grew faster. If the state had used its revenue to fully fund social security and relieve people’s worries, the PRC might have moved to a normal consumption mode supported by scitech progress. 

The problem, adds Sun, in one of his typical understatements, is that money went elsewhere; social security was left half-funded, and the next step became even harder to manage.

mounting adversity

A nation that wants to develop argues Sun, will avoid external hostilities or internal class struggle. It takes three decades to reach a decent level of development—the PRC has now hit a ceiling, while the world it faces is undergoing seismic changes. 

Sun’s term for Beijing’s immediate prospects is not ‘decoupling,’ which he deems a local, technical hitch, but ‘dismantling’. For all the conflicts of the globalisation era, three dependencies prevented anyone from leaving the game

  • European dependence on Russian energy and resources
  • European and US dependence on the PRC market
  • PRC and Russian dependence on tech and finance from advanced states

Does dismantling these bring the transfer of industrial chains and relocation of enterprises to a critical point? Sun sees, rather, a slow train wreck. The myth of energy dependency has been shattered. Of most consequence to the PRC is the fragmenting of industrial chains. 

Dismantling scenarios differ. Advanced states face issues of supply; the PRC faces one of demand. This goes not to the strength of the general public’s purchasing power or high incomes, but to the fact that the PRC’s production capacity is calibrated to world markets.

scarring effects 

COVID has stress-tested entrepreneurs, human capital, job seekers, firms and, indeed, the general public. Sun sees major fractures in social psychology. To avoid debt, people spend as little as possible. ‘China’, he warns, ‘has become a low-desire society.’

Xi’s third term has not produced an airtight thought bubble. The risk of a slow train wreck is front-of-mind to Sun and his cohort of reform veterans. Always careful what they write, they nonetheless add the grains of salt needed to assess the official story. 


reform veterans


Sun Liping 孙立平 | Sociology Department, Tsinghua University

Sun Liping 孙立平 | Sociology Department, Tsinghua University

Long professor of sociology at Tsinghua University, Sun has written sharp essays and op-eds on issues of the day before and during the Xi Jinping era (2013–). These often addressed ‘social disintegration’ and, more broadly, inequality and class division, which he sees as an ever-present threat.

Famous as Xi’s thesis supervisor at Tsinghua, he is far from a mouthpiece of ‘socialism with Chinese characteristics in the new era’, the current CPC orthodoxy. Having revealed in 2010 that Beijing’s budget for ‘stability maintenance’ far exceeded that for national defence, at the outset of Xi’s first five-year term, he charged the decade of the Hu-Wen administration with ‘North Koreanisation’.

Born in a small village in Hebei in 1959, Sun studied journalism at Peking University 1978–81, taking up sociology at Nankai University 1981–83. He was a journalist for some years before joining the faculty at Tsinghua in 1993. Published in 1996, his best-known book, ‘The road to modernisation’, became a PRC bestseller. The economy had left politics behind, he argued, brewing corruption, inequality, and unrest. With over 300 other intellectuals, Sun co-signed’ The Charter 08’ open letter to the PARty urging political reform. In 2013, speaking at Caijing Magazine’s annual Forecasting and Strategy conference, he warned of a ‘crisis of legitimacy.’ This was widely reported in the media, causing a stir in the reading public. Other notable works include Social Reconstruction (2009), China’s Political Reform (2011), and Crisis of Legitimacy (2013).


Liu Shouying 刘守英 | Renmin University School of Economics, dean

Liu Shouying 刘守英 | Renmin University School of Economics, dean

Known for reporting frankly on the PRC’s colossal farming population, Liu wrote in 2020 that public ‘concern’ for them was less for the problems they faced than for their tendency to travel to cities to petition officialdom. He recalls, ‘When I worked at the DRC (Development Research Centre), the villagers, including my relatives, ignored me whenever I returned to my hometown. On earlier visits, they had all brought me gifts of eggs, but later, they turned their heads and left when they saw me’ (due to state-imposed tax burdens).

Liu has researched rural China in academia and for the State Council, serving as a vice-head of the DRC’s Rural Economic Research Department. His extensive publications include joint research projects for the World Bank.


Wei Jianing 魏加宁 | State Council Development Research Centre researcher

Wei Jianing 魏加宁 | State Council Development Research Centre researcher

Formerly deputy director-general of the DRC’s Department of Macroeconomic Research, Wei now focuses on political structure reform, macroeconomic management, banking and financing, and crisis management. Career highlights cover 

  • research projects on crisis management (1994)
  • initiating setting up the PRC deposit insurance system (1995)
  • helping separate monetary policy from banking supervision (2002)
  • projects preventing local government debt risk (2003)

Wei was formerly secretary to DRC director Sun Shangqing 孙尚清 and assistant to leading reformist Wu Jinglian 吴敬琏. He studied in Japan and was a guest researcher at the Institute of Developing Economies, Tokyo University, and the Industrial Bank. His publications include Methodology and Promotion of Reform (2013; Japanese ed., 2020), Deposit insurance regulation (2014), Local government debt risk and new urban financing (2015), Economic Risk Assessment in the 13th 5-year plan (2016), Modernising national governance (2017), and a series on global financial crises (2020, 2021).