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A woman walks by a brokerage house in Beijing on Feb. 6, 2024.Andy Wong/The Associated Press

As tens of millions of Chinese head home this week ahead of the Lunar New Year holiday, the mood is good. According to state media that is, with the People’s Daily saying the “entire country is filled with optimism.”

But scratch under the surface and a different sentiment appears, one of growing discontent and hopelessness. People feel battered by months of economic uncertainty, falling employment and a worsening housing crisis. That Beijing’s remedies have been at best partially effective has only further sapped confidence in a government that lost many people’s trust during the COVID-19 pandemic, while views of the future are weighed down by a looming demographic crisis and slowing economic growth.

On Monday, the Organization for Economic Co-operation and Development said it expected China’s economy “to grow at a 4.7-per-cent rate in 2024 and 4.2 per cent in 2025 – a lower performance than in any of the 25 years before COVID-19, reflecting weak consumer demand and structural strains in property markets.” The International Monetary Fund last week issued a similar forecast, warning of high uncertainty facing China amid property and stock market slumps.

Beleaguered property developer Evergrande, which has become symbolic of the broader housing crisis, was last month put into liquidation by a Hong Kong court, with more than $450-billion worth of liabilities. Property once accounted for up to 30 per cent of China’s GDP and the collapse of Evergrande and several other major developers has had knock-on effects throughout the economy.

In December, new home prices fell by the highest amount in almost a decade, while overall investment in the property sector was down 9.6 per cent last year. Many households store their wealth in property, and fears Evergrande would not be able to complete promised developments have sparked protests in some parts of the country.

Stock market investors are not much better off. In the past three years, more than $8-trillion has been wiped off the value of Chinese and Hong Kong stocks. Equities did rise Tuesday after Chinese regulators announced new restrictions on trading, including anti-short-selling measures, and state-run funds bought up billions worth of shares, days before Chinese markets close for the week-long Lunar New Year holiday.

Nanjing resident Ray Zhang said she had bought into bullish narratives around the Chinese stock market and an expected rebound following the lifting of pandemic controls, plumbing much of her savings into domestic equities.

“New Year is just around the corner and I don’t know how I will tell my family about the losses,” the 27-year-old told The Globe and Mail. “My stocks are going down all the time, I feel like someone is stealing my money every day.”

Foreign investors are no more optimistic. They pulled out almost $40-billion last year, while a recent survey by the U.S. Chamber of Commerce in China found a quarter of U.S. businesses operating in the country were considering, or had already begun, relocating out of China.

As stock market woes have deepened, the Chinese authorities have responded in classic fashion: censoring criticism while boosting optimistic takes on the economy. Even the security services have gotten involved, with the Ministry of State Security on social media warning against those who advance “false narratives” to cast doubt on China’s economic system and “the path of socialism with Chinese characteristics.”

After the China Securities Regulatory Commission blocked comments on its social media this month, many took to the page of the U.S. embassy in Beijing, which tends to attract less censorship, to express their discontent. One recent post, about protecting wild giraffes in Africa, has more than 17,000 comments, with many complaining about the state of the economy.

Positive narratives have not been exempt from censorship. After a 2016 article from the People’s Daily, the official mouthpiece of the Communist Party, began to be shared widely last week, it was deleted. The piece, by economist Zheng Bingwen, predicted China would be a high-income country by 2024, “barring any major political upheavals, devastating blows to the economy, or institutional or systemic collapse.”

Mr. Zheng was optimistic China would “leapfrog” the so-called middle-income trap, whereby income per capita stagnates owing to rising costs and declining competitiveness, causing a drag on growth that makes it extremely difficult to break out of the cycle.

As many of those ironically sharing Mr. Zheng’s predictions this month understood, China’s chances of escaping this trap are looking increasingly slim. Beyond short-term challenges and shrinking growth that mean the country may never overtake the U.S. as the world’s largest economy, China is facing a looming demographic crisis that could prove beyond the Communist Party’s ability to handle.

Deaths outweighed births in China by almost two million last year, and while this drop is a blip in a population of more than 1.4 billion, it was the second straight year of decline, a sign that initial efforts to encourage people to have more children are not working.

China’s population is aging rapidly. In the next 10 years, around 300 million people currently aged 50 to 60 – China’s largest demographic group, equivalent to almost the entire U.S. population – are set to leave the work force at a time when pension budgets are already stretched, with some forecasts predicting money could run out as soon as 2035.

There is some hope for a baby boom in the Year of the Dragon, which begins on Feb. 10. Certain animals in the Lunar zodiac are seen as lucky, and there is evidence some families delay having children to wait for a particularly auspicious sign like the dragon.

But superstitions can cut both ways: the Ministry of Civil Affairs last week issued a statement refuting claims it would be bad luck to marry in 2024. Posts online claiming this was a “widow year” because the upcoming lunar year does not include a traditional “beginning of spring day,” also known as lichun, “seriously deviate from common sense and scientific sense,” the ministry said.

There are more serious potential challenges ahead in the Year of the Dragon, however, which runs until the end of January, 2025. That is when Donald Trump could be inaugurated as U.S. president for the second time, if elected this November.

During his first term, Mr. Trump oversaw a trade war with China, and has promised if re-elected to impose tariffs of more than 60 per cent on Chinese goods. Even if Mr. Trump is not victorious, the election campaign is expected to feature heated rhetoric on China, increasing pressure on U.S. firms to cut ties or reduce exposure at a time when many are already headed for the exits.

Many may not need much of a push, with recent crises sapping faith in Beijing’s ability to respond to the current moment.

“China’s economic policy-making process appears broken, or at the very least impaired,” Logan Wright, a U.S.-based analyst with the Rhodium Group, wrote last week. “As China confronts its most significant crisis of market confidence, there is only official silence, along with the tedium of multipronged proposals for initiatives that are never completed. Instead, economic policy-making is starting to resemble the period of zero COVID, complete with denials, unrealistic messaging and then finally a mad scramble to adjust to reality.”

With reports from Reuters and Alexandra Li

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