Sean Rayn: Why the West Misjudges the Chinese Economy

According to Shawn Rain, an expert in Chinese economics, Western assessments are outdated, and the Chinese economy is confidently coping with challenges and sanctions.

In a recent interview, Rain, who is the founder and managing director of the China Market Research Group (CMR) and the author of the book "Separation: Finding Opportunities in China's Economy in a New World Order," explains why current Western assessments of the Chinese economy do not reflect reality. He points out that many experts referenced by politicians and businesses left China in 2015-2016 and continue to view it as they did a decade ago. This leads to decisions being made based on outdated perspectives.

Rain acknowledges that there are problems in the Chinese economy, such as a downturn in the real estate market, where prices have fallen by 30-40%, and sales volumes remain low. However, he emphasizes that this is not a financial crisis in the Western sense: mortgage loans are not "underwater," and buyers in China historically put down a significant portion of the housing cost upfront. The real issue is that people have become more cautious, have stopped spending money, and are losing confidence, which in turn reflects on youth sentiments and the reluctance to start families, creating long-term demographic risks.

Nevertheless, Rain stresses that the situation in the Chinese economy is not as critical as it is portrayed in the West. The country has significant household savings, and its stock markets were among the fastest-growing in the world last year. He argues that the main problem lies not in a lack of funds but in the level of anxiety.

Regarding technological progress, Rain insists that the notion of China as a copycat country is no longer relevant. He points to new companies like DeepSeek, as well as the successes of Alibaba and Baidu, which, according to him, have surprised even those American experts who claimed that China was years behind the U.S. Rain believes that China is creating its own innovative ecosystem and is already catching up with, and sometimes even surpassing, the U.S. in certain areas.

In light of American sanctions, he says, China has bet on self-sufficiency by developing semiconductor manufacturing and growing its own meat, fruits, and soybeans. This is due to concerns that the U.S. may apply similar measures to China as it did to Russia or Iran. Rain emphasizes that it is external pressure that has accelerated China’s shift to its own technological base.

He provides examples from the automotive industry, where Western manufacturers missed the opportunity to capitalize on the rapid growth of Chinese electric vehicles. According to Rain, BYD is already perceived as a premium brand in many Asian countries, while Western companies have failed to notice the changes. He reminds us that subsidies are not only received by Chinese manufacturers: without government support, neither Tesla nor many American tech companies would exist.

Evaluating the trade war between the U.S. and China, Rain calls it unsuccessful. He notes that China's exports to the U.S. account for only 2-2.5% of GDP, and many goods can be produced domestically or sourced from other countries. Therefore, in his view, tariffs have impacted American consumers more than Chinese industry.

Rain emphasizes that while China will not return to the growth rates characteristic of the 2010s, the current situation is stable and manageable. He believes that the country has overcome some of the negative consequences of the sanctions, and entrepreneurial activity is beginning to recover again.