Zoho founder Sridhar Vembu has raised a red flag over China’s economic model, calling it “fundamentally flawed” and unsustainable. In a post on X, Vembu criticized China’s relentless push for investment at the cost of domestic consumption, arguing that its “export at all costs” strategy forces other nations to import in excess—a system he doubts can survive for another 25 years.
Vembu’s comments were triggered by a post highlighting how China has yet to reverse the decline in its consumption share since Zhu Rongji's economic reforms and WTO entry. Zhu Rongji’s reforms reshaped China’s economy through SOE restructuring, financial sector modernization, and market liberalization. His Zhuada Fangxiao policy consolidated large state-owned enterprises (SOEs) while privatizing smaller ones, improving efficiency but resulting in millions of job losses. In banking, he created asset management companies to manage bad loans and encouraged bank privatization to introduce market competition. Zhu’s tax-sharing system, modeled on the U.S. federal structure, boosted central revenue and streamlined fiscal management.
On the global front, Zhu was instrumental in China’s WTO entry in 2001, opening markets and reducing trade barriers. He also slashed tariffs, strengthening China’s export-driven economy. Domestically, he halved the bureaucracy, tackling inefficiency and corruption. Though his policies triggered significant layoffs, they stabilized inflation, strengthened the financial sector, and fueled rapid economic growth, cementing China’s position as a global powerhouse.
Calling this China’s “original sin”, Vembu argued that the country has created a structurally unbalanced economy that has only survived through endless debt expansion.
"The only way this system has 'balanced' itself is by endlessly increasing debt (and therefore money, because money itself is someone else's debt in our money-backed-with-nothing pure fiat system). In a saner monetary system, importing nations would have literally 'run out of money (gold)' so they could not keep importing," he wrote.
This is not the first time Vembu has sounded an alarm on economic imbalances. He has also warned about India’s over-reliance on IT, arguing that its dominance has “sucked all the oxygen” from other critical industries like manufacturing and core engineering.
"When money pours into an industry too rapidly, it sucks resources and can leave us with fewer capabilities than before in other critical sectors that get neglected during the flood of money," he said, comparing financial bubbles to “flash floods.”
His remarks struck a chord online, sparking discussions on the over-concentration of talent in IT at the cost of other fields. One user lamented, “There is not a single kid who wants to go for non-IT, hardcore branches of engineering unless they have no other options. The long-term damage to neglected manufacturing is real.”