In a recent op-ed piece for The New York Times, renowned economist Paul Krugman expressed concern over China's economic performance, stating that the world's second-largest economy is underperforming on various fronts. Drawing parallels to Japan's experience after its asset-price bubble burst in the 1980s, Krugman highlighted potential challenges for China ahead.

While Krugman does not consider the situation in China a full-blown crisis, he believes that the country is entering an era of stagnation and disappointment. One of the contributing factors, according to Krugman, is the arbitrary interventions of China's leadership, particularly President Xi Jinping's crackdown on the tech industry, which may hinder efficient economic management.

Furthermore, Krugman argues that China's economic approach has been unsustainable for years and was bound to face breakdown eventually. He highlights the country's heavy reliance on investment-driven growth, with over 40% of GDP attributed to such investments. In contrast, consumer spending has made up a relatively small percentage of China's GDP, primarily due to financial repression and weak social safety nets that encourage saving over spending.

Krugman points out that China has masked its weak consumer spending by fueling a booming real estate sector, which contributes to a quarter of the country's GDP and almost 70% of household wealth. However, he warns that these real estate bubbles are not sustainable, as recent crashes in the Chinese developer market have demonstrated, leading to defaults and bankruptcies.

The bigger concern lies in how China will react to its economic struggles. Krugman poses questions about whether China will attempt to boost its economy through an export surge, potentially conflicting with Western efforts to promote green technologies. He also raises the prospect of China engaging in military adventurism as a distraction from domestic difficulties, which has worrying implications.

As China faces economic challenges, Krugman reminds readers not to gloat over its stumble, as the ramifications could extend beyond its borders and become a global concern.

While China's exact path forward remains uncertain, Krugman's analysis serves as a cautionary note, urging vigilance and close attention to China's economic trajectory in the coming months and years.