Ruchir Sharma, author and global investor, says China’s biggest success—getting the government out of the economy—is now being reversed. Once a self-declared “big bull” on China, Sharma now sees the country’s debt, demographics, and competition model as deep structural problems.
In a podcast with Zerodha co-founder Nikhil Kamath, Sharma described how his optimism about China’s economic rise began to fade nearly a decade ago. “What people forget about China is that the key success to its economic story was the government getting out of the way,” he said.
Under Deng Xiaoping’s reforms, the Chinese state dramatically reduced its control. “The government kept downsizing… first giving agriculture land, then property rights back to the people, selling off unprofitable state-owned enterprises,” Sharma explained. By the early 2000s, the state’s role in employment had fallen to around 30%.
But in the past decade, Sharma said, Beijing tried to maintain rapid growth by “taking on too much debt” and building overcapacity. “They were very ambitious—they wanted to keep growing at 6%, 7%, 8%, and that led to a build-up of debt,” he said. Today, China’s total debt as a share of its economy rivals that of the United States—despite China being a far less wealthy nation.
The second red flag is demographics. “There is no country in the world which has grown rapidly without rapid population growth,” Sharma said. “China’s population is now shrinking.”
Kamath then asked whether India might face similar challenges. Sharma was clear: India’s demographic curve is slowing, but nowhere near a drag. “In our lifetimes, India’s population will still be growing. We’re not even close to facing what China is facing,” he said.
That gives India an opportunity China no longer has—growth driven by a young, expanding workforce. However, Sharma hinted that India must avoid the same trap: “It’s not just about the population, it’s what you do with it. China once had the right formula—less government, more freedom—but it reversed course.”
He added that while China’s edge remains in tech—particularly AI—its internal economic dynamics have become too cutthroat. “In China, competition is so intense that making money as an investor is harder than in America,” Sharma said.
India, for now, still has breathing room. But Sharma’s warning is clear: stay the course, or repeat China’s mistakes.
