Shortly after President Xi Jinping came to power in 2012, he described his “Chinese dream” for national rejuvenation. A decade later, he is entering his toughest time yet to turn that vision into reality.
The Chinese leader emerged from the Communist Party’s secret summer retreat on the Yellow Sea this week, facing mounting problems at home and abroad. Xi has just months to make sure they don’t overshadow his greatest achievement yet: securing an unprecedented third term at the helm of a party congress later this year.
With economic growth forecasts dashed, Covid cases hit a three-month high and the US pushing back on Taiwan, every week seems to bring a new crisis. That left Xi focused on containing risk and trying to project stability, rather than promoting his achievements and marching towards a crowning achievement.
A property bailout fund, efforts to streamline Covid Zero with production bubbles and more subsidies to keep businesses afloat despite a lack of sales show the government’s efforts to stop the situation from getting worse, Craig Botham says , chief economist for China at Pantheon Macroeconomics.
“There will be pressure to prevent the situation from boiling over,” he said. “Stability is the goal, really, because it helps the party maintain power.”
Economic weakness is widespread, in part because of Xi’s lockdown-dependent Covid Zero strategy. Retail sales, industrial production and investment all slowed last month, missing economists’ estimates. Although overall employment has picked up slightly, youth unemployment has reached a record 20%.
A surprise rate cut by the People’s Bank of China (PBOC) and reports that local governments may be allowed to sell 1.55 trillion yuan ($228 billion) in bonds signal growing concern among policymakers . The latest economic data suggests a slump in Chinese business and household confidence and a reduced appetite to borrow.
Xi struck a firm tone during a tour of northeast Liaoning Province this week, stressing the need to follow government orders to maintain stability, pandemic control and development. economic and social affairs ahead of the party congress, the official Xinhua news agency reported on Thursday.
China “must insist on self-reliance and make the development of the country and people the basis of our strength, and firmly take the lead in our development,” he said.
The party could announce as early as this month the dates for its two-decade reshuffle, which it says will be held in the second half of the year. While Xi faces no visible opposition to remaining as leader for the foreseeable future, a perceived weakness could influence key personnel decisions or signals about possible successors.
Chinese leaders have so far ruled out a repeat of past stimulus efforts that have exacerbated the country’s debt problems. And Xi did nothing but reaffirm the need to maintain a zero-tolerance approach to the pandemic, which requires authorities to shut down businesses and lock down residents when major outbreaks occur.
Major investment banks, including Goldman Sachs Group Inc., cut their growth estimates for China for the year to 3%, well below the government’s original target of around 5.5%.
“It’s a tricky situation,” Hui Shan, chief China economist at Goldman Sachs, said in a Bloomberg TV interview on Thursday, citing China’s low immunity and vaccination rate among the elderly as a hurdle. at reopening.
“When you break down the headwinds of the economy one by one, there are limits to what the government can or will do.”
Hainan’s tropical resort haven on the South China Sea has been closed for nearly two weeks, leaving some 150,000 tourists stranded. In Tibet, hundreds of vehicles were stuck in a traffic jam as visitors trying to flee the Covid hotspot were denied entry into neighboring Yunnan province.
This adds to the risk of growing social unrest as people adjust to the reality of living in a seemingly endless cycle of lockdowns, weak job prospects and falling house prices. An estimated 15 million young people are jobless in China, as a record number of college and vocational school graduates enter the job market this summer.
Authorities are already grappling with protests in more than 100 cities from homebuyers angry over delays in the apartments they bought. Once a core aspiration for the middle class, even home ownership is no longer a surefire way to boost personal wealth as prices fell for an 11th month in July.
It’s a difficult backdrop for Xi to argue that China is on course to realize its dream of becoming “prosperous, strong, democratic, culturally advanced and harmonious” by the 100th anniversary of the People’s Republic in 2049. .
Just last year, the president declared victory in building a “moderately prosperous society in all respects”.
Xi also faces a US showdown over Taiwan, long seen as the most volatile issue between the world’s biggest economies. US House Speaker Nancy Pelosi’s trip to the democratically-ruled island came as Xi huddled with party elders earlier this month, inciting the Chinese military to organize exercises around the island, including probably firing missiles over Taipei.
“The prognosis for U.S.-China relations is darkening,” said Ali Wyne, principal analyst at Eurasia Group Ltd. “If Xi continues to assess that the United States is in terminal decline and that China will succeed in achieving growth and technological autonomy, he is unlikely to significantly recalibrate China’s foreign policy.
‘Fight against the fire’
The deepening of the division with the United States and its allies also matters to us. The nationalists’ bellicose responses on social media expressing their disappointment with China’s initial response to Pelosi show how carefully he must handle growing nationalism.
Beijing’s crises at home and abroad have undermined the party’s fundamental promise to establish China’s prowess on the world stage and restore prosperity to its citizens.
Many “firefighters” are needed to restore stability, said Botham of Pantheon Macroeconomics. He added that it evokes the image of a swan: “calm and serene above the water, but paddling like hell below the surface”.