Empty Streets, Shrinking Cities: China’s Economic Reality | Digging into China|| Digging into China

Hi, I'm Long Xiong. Welcome to Digging into China, where we explore China in depth to reveal unique perspectives. How severe is the downturn in China's economy? Official data from China's National Bureau of Statistics may not provide a clear picture, but information from non-economic government agencies often reveals the reality. Today, let's explore the true state of China's economy from a distinctive angle. On August 27, the Chinese Ministry of Transport published urban passenger transport statistics for the first seven months of this year. The figures indicate that from January to July, Chinese cities recorded a total of 60.32 billion passenger trips, a 27% drop compared to 2024. Of these, bus and trams accounted for 21.38 billion trips, or 35% of the total, down 5.4% from last year. Taxes completed 19.84 billion trips, representing 33% of the total, with a 4.7% year-on-year decline. Urban rail transit, such as subways, logged 19 billion trips, making up 32% of the total, and showed a modest 2.8% increase over 2024. For July alone, bus and tram trips fell by 8.1% compared to the previous year, taxi trips decreased by 6.7%, and rail transit saw a slight 1.6% rise. However, the increase in rail transit passenger volumes from January to July stemmed primarily from expanded operational mileage. In reality, the average passenger intensity for rail transit across the country has been steadily declining. In June, the average was 8,170 passengers per kilometer per day, a 3.1% drop from May and a 3.8% decrease from June 2024. Even during the peak travel month of August, the Ministry of Transport reported that rail transit's average passenger intensity fell by 1.7% from July and by 4.9% compared to August 2024. In essence, not only are bus and taxi passenger numbers declining significantly, but the rail transit's passenger intensity is also down by approximately 5% from 2024. When compared to pre-pandemic 2019, the decline is even more striking. In Shanghai, passenger intensity fell from 15,500 passengers per kilometer per day in 2019 to 11,600 in 2024, a 34% decrease. In Beijing, it dropped from 15,700 to 11,600, a 35% decline. In Guangzhou, the figure plummeted from 19,300 to 13,700, a remarkable 41% reduction, a decline of over 40% in passenger intensity means that a subway car that once carried 10 passengers in 2019 now carries fewer than 6 in 2024. With an additional 5% drop this year, this means the number of people using subways and other rail transit is nearly half of what it was before the 2019 pandemic. Notably, urban rail transit is the only one of the three major urban transport modes showing any growth. Buses and taxis are experiencing not only fewer total trips but also much steeper declines in passenger intensity compared to rail transit. These passenger transport statistics from the Ministry of Transport directly challenge China's reported GDP growth of 5% for several consecutive years. Economic growth depends on the movement of resources guided by market prices toward sectors that maximize efficiency and output, thereby driving overall economic expansion. Urban passenger transport volume reflects the flow of China's most critical resource, its workforce, and serves as a key indicator of activity in the manufacturing and service sectors, which form the backbone of China's GDP. In China, manufacturing growth relies heavily on labor and capital investment while the service sector is primarily driven by affordable labor. Urban passenger transport volume directly indicates the number of employed individuals in the city's manufacturing and service industries, making it closely tied to GDP. A shrinking passenger transport volume in the city signals fewer people commuting to work, pointing to an undeniable economic decline. Regardless of how impressive the GDP figures from the National Bureau of Statistics may appear, they cannot conceal the real economy's downturn. The Ministry of Transport's data also aligns with reports from mainland Chinese social media which depict deserted city streets, closed shops, and shuttered malls. On August 25, Chinese media reported that the Shanghai Shentong Metro Group launched a workforce optimization plan, laying off approximately 2,000 employees, primarily those over 50. On August 28, Sina Finance, a prominent Chinese outlet, revealed that the Shanghai Pudong Airport had initiated a large-scale layoff plan targeting 8,000 employees. Public transport companies in various Chinese cities, particularly in third and fourth tier cities, are increasingly suspending operations. As unemployment rises, bus passenger volumes are dropping sharply, leading to the closure of bus companies and routes. The vitality of Chinese cities, whether major metropolises or smaller urban centers, is visibly fading at an alarming pace. In three to five years, the vibrant neon lights of Chinese cities at night and the bustling crowds shopping on their streets may become irrelevant. On September 2, Gao Guoli, Director of the National Development and Reform Commission's Center for Urban and Small Town Reform and Development, publicly acknowledged that a small number of cities, due to issues such as limited industrial diversity, are losing resources. These are now termed shrinking cities. This admission from the National Development and Reform Commission signals that the government recognizes a problem. The vast urban clusters developed during China's reform and opening up era are facing significant challenges. As of 2024, China has 694 cities with the National Development and Reform Commission classifying 139 of them, 20% of the total, as shrinking cities. However, the Ministry of Transport's passenger transport data suggests that nearly all Chinese cities are contracting. Every city's passenger transport volume is decreasing, reflecting fewer employed individuals and fewer people going out to shop, dine, or engage in leisure activities. This sharp decline in economic vitality is causing service industries to struggle, with restaurants, shops, kindergartens, schools, and malls closing or consolidating. When a city loses its core service functions, its ability to attract residents diminishes, reducing job and development opportunities for those living there. Meanwhile, the cost of urban living far exceeds that of rural areas, prompting large numbers of unemployed individuals to leave, accelerating the city's decline. The Ministry of Transport's passenger transport statistics confirm that this decline is occurring across Chinese cities. In Shanghai, passenger intensity has dropped by a third since pre-pandemic 2019. In Beijing, it's down nearly 40%. And in Guangzhou, it has fallen by almost half. This is not a gradual decline, but a precipitous collapse. China's economic model differs from the consumption-driven economies of Western nations like those in Europe and the United States, where economic growth ultimately manifests in widespread increases in personal income and wealth. When people have more money, they spend more, boosting production and creating a virtuous cycle of consumption and growth. In China, however, economic growth does not primarily result in higher personal income or wealth. Household income as a share of GDP has declined from over 50% at the start of the reform era to roughly 40% after the pandemic. In China's government-led economic model, citizens are treated as a resource to be utilized rather than the goal of development. As a resource, their cost is kept as low as possible. Consequently, during the reform era's economic growth, Chinese workers have endured a 9-9-6 work culture, working from 9am to 9pm six days a week. The outcomes and priorities of China's government-led economic development are the cities constructed with steel and concrete, alongside railways, highways, and extensive infrastructure projects. These projects represent the celebrated achievements of the reform era, showcased to the world. China's economic achievements are more visible than those in the West. Visiting Chinese cities, one immediately notices wider roads, towering skyscrapers, expensive train stations, grand airports, and efficient subway systems. While these steel and concrete cities are all inspiring, they obscure the heavy burdens ordinary Chinese people face in their daily lives, as well as the challenges of accessing education, health care, and retirement security. In Western societies, economic development results in prosperous citizens with secure, balanced lives, reflecting a fundamentally different philosophy of social progress. Does government-led economic growth aim to enhance the wealth of its people, or to construct monuments for self-aggrandizement? China's approach has made it the only country to experience over 30 years of rapid economic growth without providing comprehensive social security for its citizens. The Ministry of Transport's passenger transport data highlights a profound urban decline crisis in China. When residents lose their jobs, their purchasing power, and their creative energy, the wider roads, towering buildings, grand stations and airports, and extensive public transit systems touted as economic achievements by the government will become mere relics. People are the core resource of a city, just as they are for a nation's economy. When a government treats its citizens as tools for economic development rather than its purpose, it risks losing both its people and its legitimacy. This misguided approach is rapidly undermining the future of China's economy. Over the 40 years since the reform and opening up, China has experienced the world's largest and fastest urbanization, with urbanization rates rising from 11% in 1949 to 67% in 2024. The rise of urban clusters has symbolized China's economic ascent. Yet, in the decades ahead, these vast urban clusters face accelerating decline, signaling the broader decline of the Chinese economy itself. Thank you so much for watching. 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