China’s Leader Acknowledges Poor Economy, Has No Solution

CommentaryChinese Communist Party (CCP) leader Xi Jinping knows that the outlook for the Chinese economy is grim, but he has no answers.Despite China hitting its growth target of 5 percent for 2023, the economy remains sluggish, marked by a decelerating manufacturing sector. The Purchasing Managers Index (PMI), a gauge of industrial activity, dropped to 49 last month, below the threshold of 50, which denotes an economic contraction.There is little hope that the situation will improve, given persistent problems, including the real estate downturn, record-high youth unemployment, weak consumer prices, suppressed demand, and mounting debt amid reduced revenues at local governments. Until these issues are resolved, the Chinese economy cannot return to the years of exceptional growth.Looking ahead, the housing market, constituting about a quarter of the GDP, is anticipated to undergo further contraction, grappling with persistent oversupply issues. Simultaneously, debt accumulation is becoming more pronounced, with property developers, local governments, and state enterprises facing increasing challenges in meeting their interest payments. The aging crisis is contributing to a reduction in the size of the workforce, posing a significant concern for a country experiencing stagnant productivity. Consequently, the World Bank predicts a 4.5 percent growth in 2024, while the International Monetary Fund (IMF) anticipates a continued decline, reaching 3.5 percent by 2028.In its usual manner, the CCP is averse to publicizing China’s economic challenges. Beijing unleashed a wave of criticism against Moody’s Investors Services in early December when it downgraded the outlook for Chinese sovereign bonds from stable to negative. More recently, the CCP has cracked down on the reporting of negative information about China’s economy, hoping to rebuild the public’s confidence.Related StoriesXi vowed, “We will consolidate and strengthen the momentum of economic recovery, and work to achieve steady and long-term economic development.”However, there does not seem to be a plan to do so.In the same speech, he also said, “China will surely be reunified, and all Chinese on both sides of the Taiwan Strait should be bound by a common sense of purpose and share in the glory of the rejuvenation of the Chinese nation.”Taking Taiwan by force will not save the Chinese economy. In fact, it is one of the many policies that is driving away foreign investors and hindering economic growth.Beijing’s increasing inclination toward a more interventionist economic strategy, giving precedence to the party-state’s control over economic and social affairs at the expense of the private sector, has unsettled entrepreneurs. A prominent example is Alibaba Group, which, as one of the initial casualties of the CCP’s tech crackdown, announced last January that it would be divesting itself of Ant Group.The very entrepreneurial firms that once propelled China’s swift economic growth are currently contending with the politicization of regulations and the business environment. The constraints imposed by the CCP are not only depriving the country of crucial job opportunities but also impeding the generation of essential tax revenue.Moreover, the CCP’s stringent measures, ostensibly implemented for national security reasons, appear to have discouraged international investors. Foreign companies now grapple with a challenging decision—whether to stay or leave China. The CCP has altered domestic policies, influenced by shifts in the geopolitical landscape and strained relations with the United States, injecting heightened uncertainty into the operating environment for foreign companies.Although Beijing claims to encourage foreign investment and has taken some steps to promote it, the Counterespionage Law remains in place, prompting the U.S. National Counterintelligence and Security Center to issue a warning to American companies. The law’s vague wording could deem normal business activities—such as auditing and due diligence—illegal.Consequently, companies like Apple are shifting at least some of their manufacturing to India, Vietnam, and other friendlier nations. Due to investment being diverted from China, the regime’s State Administration of Foreign Exchange reported in the third quarter that foreign direct investments were negative $11.8 billion.Xi’s acknowledgment of the poor economic outlook is significant. It is evident that he recognizes the problem but lacks a solution. His remark about Taiwan is particularly concerning. Unable to establish his legacy as the great economic savior of the nation, Xi may view the invasion of Taiwan as his only viable path toward political immortality.Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.

China’s Leader Acknowledges Poor Economy, Has No Solution

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Commentary

Chinese Communist Party (CCP) leader Xi Jinping knows that the outlook for the Chinese economy is grim, but he has no answers.

Despite China hitting its growth target of 5 percent for 2023, the economy remains sluggish, marked by a decelerating manufacturing sector. The Purchasing Managers Index (PMI), a gauge of industrial activity, dropped to 49 last month, below the threshold of 50, which denotes an economic contraction.

There is little hope that the situation will improve, given persistent problems, including the real estate downturn, record-high youth unemployment, weak consumer prices, suppressed demand, and mounting debt amid reduced revenues at local governments. Until these issues are resolved, the Chinese economy cannot return to the years of exceptional growth.

Looking ahead, the housing market, constituting about a quarter of the GDP, is anticipated to undergo further contraction, grappling with persistent oversupply issues. Simultaneously, debt accumulation is becoming more pronounced, with property developers, local governments, and state enterprises facing increasing challenges in meeting their interest payments. The aging crisis is contributing to a reduction in the size of the workforce, posing a significant concern for a country experiencing stagnant productivity. Consequently, the World Bank predicts a 4.5 percent growth in 2024, while the International Monetary Fund (IMF) anticipates a continued decline, reaching 3.5 percent by 2028.
In its usual manner, the CCP is averse to publicizing China’s economic challenges. Beijing unleashed a wave of criticism against Moody’s Investors Services in early December when it downgraded the outlook for Chinese sovereign bonds from stable to negative. More recently, the CCP has cracked down on the reporting of negative information about China’s economy, hoping to rebuild the public’s confidence.

Xi vowed, “We will consolidate and strengthen the momentum of economic recovery, and work to achieve steady and long-term economic development.”

However, there does not seem to be a plan to do so.

In the same speech, he also said, “China will surely be reunified, and all Chinese on both sides of the Taiwan Strait should be bound by a common sense of purpose and share in the glory of the rejuvenation of the Chinese nation.”

Taking Taiwan by force will not save the Chinese economy. In fact, it is one of the many policies that is driving away foreign investors and hindering economic growth.

Beijing’s increasing inclination toward a more interventionist economic strategy, giving precedence to the party-state’s control over economic and social affairs at the expense of the private sector, has unsettled entrepreneurs. A prominent example is Alibaba Group, which, as one of the initial casualties of the CCP’s tech crackdown, announced last January that it would be divesting itself of Ant Group.

The very entrepreneurial firms that once propelled China’s swift economic growth are currently contending with the politicization of regulations and the business environment. The constraints imposed by the CCP are not only depriving the country of crucial job opportunities but also impeding the generation of essential tax revenue.

Moreover, the CCP’s stringent measures, ostensibly implemented for national security reasons, appear to have discouraged international investors. Foreign companies now grapple with a challenging decision—whether to stay or leave China. The CCP has altered domestic policies, influenced by shifts in the geopolitical landscape and strained relations with the United States, injecting heightened uncertainty into the operating environment for foreign companies.
Although Beijing claims to encourage foreign investment and has taken some steps to promote it, the Counterespionage Law remains in place, prompting the U.S. National Counterintelligence and Security Center to issue a warning to American companies. The law’s vague wording could deem normal business activities—such as auditing and due diligence—illegal.

Consequently, companies like Apple are shifting at least some of their manufacturing to India, Vietnam, and other friendlier nations. Due to investment being diverted from China, the regime’s State Administration of Foreign Exchange reported in the third quarter that foreign direct investments were negative $11.8 billion.

Xi’s acknowledgment of the poor economic outlook is significant. It is evident that he recognizes the problem but lacks a solution. His remark about Taiwan is particularly concerning. Unable to establish his legacy as the great economic savior of the nation, Xi may view the invasion of Taiwan as his only viable path toward political immortality.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.

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