President Xi’s left peering over a Great Wall of debt
His failure to restructure China’s economy poses unparalleled risks and threatens to rock the Party
President Xi Jinping still appears to be dizzy with dreams about “China’s Century.” In March, the newly anointed president for life told nearly 3,000 Communist Party delegates that “the Chinese nation’s great revival is on an irreversible path.”
He was right to a degree. But he failed to mention that the “miracle” that fueled the world’s second-largest economy had evaporated into a mirage. Mired in debt, Xi’s obsessive bungling has left the country on an “irreversible path” to economic pain.
His failure to “restructure” China’s economy poses unparalleled risks, which threaten to rock the very foundations of the Party’s right to rule. In short, the economy is in a mess.
“Things always fail slowly until they suddenly break,” William Hurst, of the University of Cambridge in the United Kingdom, said.
“There is a significant risk in the short term of [a] financial crisis that would carry very substantial social and political costs for the Chinese government. Eventually, there’s going to have to be a reckoning,” he told the Reuters news agency.
Crisis of confidence:
- Comrade Xi has failed to roll out policies to restructure China’s economy.
- This has hit consumer spending, which continues to shrink.
- Factory activity is weak while unemployment among the young could be as high as 46%.
- As for local government debt, last year it topped US$13 trillion or 76% of economic output.
- A property meltdown has also triggered protests across the country.
Patience is wearing thin among American business.
Gina Raimondo, the US Commerce Secretary
Delve deeper: China’s economic model is broken. Runaway investment in the property sector has built Everest-style mountains of debt, triggering a tsunami of bad loans.
Between the lines: At least four million residential homes are now unoccupied nationwide with property giants Evergrande and Country Garden struggling to stay afloat.
Big picture: As the economy tanks, Xi has orchestrated a massive propaganda campaign, rolled out a catch-all National Security Law and doubled down on the surveillance state. This has become increasingly challenging for American and European companies in China.
What they are saying: “Patience is wearing thin among American business. They need and deserve a level playing field,” US Commerce Secretary Gina Raimondo told CBS’s Face the Nation at the weekend just days after talks in Beijing.
China Factor comment: The dramatic “foreclosure” of the country’s “boom era” of “openness” is illustrated by Xi’s decision to skip this week’s Group of 20 nations summit in New Delhi. Secure, of course, behind the Great Red Wall.