New Delhi, May 30 (IANS) China’s centrally planned economic model is creating structural weaknesses that are increasingly visible in its economy, according to a report.

An analysis by The National Interest argued that while Beijing’s tight political and economic control is often viewed as giving China a competitive advantage over market-driven economies, such centralisation is increasingly emerging as a source of economic weakness.

While China’s system allows authorities to direct resources across industries and regions, the report said that this comes at the cost of efficiency, flexibility and long-term economic stability.

It further noted that China’s industrial policy remains highly centralised, with state authorities influencing both demand and supply across sectors ranging from manufacturing to services.

While this approach has enabled rapid expansion in key industries, it has also contributed to economic imbalances and misallocation of resources.

One of the most visible stress points is China’s property sector, which has been in crisis since 2021.

Years of state-supported expansion through low interest rates, subsidies and coordination with local governments fuelled rapid growth, making real estate a major contributor to GDP.

However, policy tightening in 2020 under the “three red lines” framework triggered defaults across major developers, including Evergrande, turning the sector into a drag on growth.

In response, Beijing expanded its industrial strategy under initiatives such as “Made in China 2025”, directing large-scale investment into sectors including electric vehicles, semiconductors and artificial intelligence.

While this increased production capacity, it also contributed to excess supply, falling prices and rising export dependence.

The report pointed to growing external pressures, including declining exports to the United States and increasing trade restrictions from Europe and other regions, further challenging China’s growth model.

While supporters highlight China’s dominance in rare earth processing as evidence of strategic strength, the report argued that global diversification efforts are gradually reducing this advantage.

–IANS

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