The Chinese economy's protracted period of stagnation is nearing a four-year stretch, raising questions about the durability of the nation's social compact in the face of persistent underperformance. Recent data points to a troubling economic trend, with key indicators such as retail sales, industrial production, and investment falling short of expectations. The housing market's prolonged downturn persists, despite substantial government stimulus measures.

Retail sales have notably slowed, operating at roughly half their usual growth rate and remaining significantly below the pre-pandemic trend. In a concerning sign, both car sales and bank credit have contracted—a pair of traditional bellwethers for economic health. The retreat of foreign investment from China's shores complements an internal narrative of declining orders, revenue, and profit margins among Chinese firms.

Amidst this domestic economic malaise, the country's exports remain a solitary beacon of resilience. However, this dependency on foreign markets is exacerbating trade tensions, particularly with major destinations like the United States and Europe. The latter has already imposed a 38% tariff on Chinese electric vehicles, a harbinger of potentially more restrictive measures to come.

The socio-economic fabric of the nation is showing signs of strain. China's youth unemployment reached alarming heights last year before the government ceased its reporting, casting a pall over the country's ability to address this critical issue. Public discontent is simmering, evidenced by the numerous, though heavily censored, reports of riots and protests against issues ranging from property theft to banking insolvency.

President Xi Jinping's leadership style, characterized by a tightening grip in times of adversity—exemplified by stringent COVID lockdowns—suggests a departure from the free enterprise-driven growth of past decades. This shift could signal a new era of subdued growth for China, with potentially grave consequences if dissatisfaction boils over into widespread civil unrest.

The implications for international relations are equally precarious. As domestic challenges mount, there is a looming risk that China might resort to aggressive foreign policy maneuvers, such as escalating tensions over Taiwan. This could intersect with the Biden administration's foreign policy imperatives, potentially leading to a dangerous entanglement.