Karl Marx and Friedrich Engels warned in The Communist Manifesto that capitalism could lead to an "epidemic of over-production" in which exploited workers were too poor to consume what they produced. That prediction, MIT economist Yasheng Huang has argued, now describes the Chinese economy with uncomfortable precision.
China accounts for 35 percent of global manufacturing capacity and 18 percent of the world's population but only 11 percent of global consumption, Huang wrote in a Foreign Affairs analysis, as "Hvylya" reports. For decades, China avoided the Marxist trap because globalization provided an outlet: the rest of the world bought what Chinese workers could not afford to.
That safety valve is now failing. Since 2022, China's trade surpluses have surged - reaching $1.2 trillion in 2025 - amid a collapse of domestic consumer confidence. On the supply side, low wages reduce the cost of capital, encouraging firms and the government to overbuild. On the demand side, chronic deflation has set in as China's ability to produce has outpaced domestic demand "by a huge margin," Huang wrote.
The irony, Huang noted, is that capitalist countries have largely avoided Marx's overproduction scenario by recognizing that workers are also consumers and allowing wages to rise. He cited Henry Ford, who famously increased his workers' pay so they could afford the cars they assembled. "Unless the employee gets enough to live on, he cannot be a consumer," Ford wrote.
Huang called on Beijing to enrich its citizens through collective bargaining, social security, removed wage caps, and a higher minimum wage. Without a shift toward a more pro-worker stance, he warned, China's economy will grow more lopsided, trade tensions will keep rising, and Chinese citizens will fail to reap the full benefits of the economic miracle they created.
Previously: China's Rare Earth Checkmate: The Move That Forced Washington to Back Down.