As China grapples with mounting debt and a slowing economy, President Xi Jinping remains steadfast in his vision for the country’s future, continuing to prioritize a top-down economic strategy aimed at boosting industrial power, the Wall Street Journal reports.
Despite the significant challenges facing the nation, Xi is determined to stick to his plan of positioning China as a global leader, particularly in the face of growing tensions with the US.
Over a decade into Xi’s leadership, it has become evident that China’s rapid growth was fueled by unsustainable borrowing, real estate speculation, and investments in unnecessary infrastructure projects. The country now finds itself in a precarious economic position, with a ballooning debt load, a property market crisis that has wiped out trillions in household wealth, and signs of a deflationary spiral. Meanwhile, Western investment has dropped, and consumer confidence is at a historic low.
Despite these struggles, Xi has not wavered in his belief that China can surpass the US in economic power. He remains convinced that his approach—centralizing control over the economy and expanding industrial capabilities—offers the best path forward. Close associates to Beijing’s decision-making circle suggest that Xi still sees the US as a declining superpower, with China’s rise continuing to shape the global economic landscape.
Xi’s focus has been on strengthening China’s industrial capabilities, particularly in sectors like semiconductors, which are seen as vital for reducing dependency on Western technologies. In preparation for future trade conflicts, Xi has also sought to create an industrial supply chain capable of withstanding potential tariffs and other trade barriers. China’s efforts to foster alliances in the developing world are part of this broader strategy to increase its influence.
However, critics argue that Xi’s refusal to adopt necessary economic reforms has contributed to the nation’s current financial woes. Despite some recent stimulus measures, Beijing has not effectively addressed issues like local government debt, the troubled property sector, or the need for increased consumer spending. The country’s economy remains heavily reliant on exports, with consumer spending making up only 39% of GDP—far less than in Western countries like the US, where it accounts for 68%.
Many economists have voiced concerns that China is running out of time to resolve its economic problems, particularly given the unfavorable demographic trends and the looming risk of a long-term downturn. The failure to address these issues could lead China into a prolonged period of stagnation, which would make its economic competition with the US even more difficult.
Xi’s leadership has also been marked by increasing state control over the economy. The government has provided significant subsidies to sectors such as semiconductors and electric vehicles, while cracking down on the private sector. While some argue that these efforts are necessary to strengthen China’s industrial base, others believe the heavy-handed approach has stifled innovation and led to overproduction in certain industries.
Additionally, the property bubble, which Xi allowed to inflate for years, has now created a real estate crisis. Many housing units sit empty, and the market continues to struggle. Though Xi’s government finally took steps to curb excessive borrowing by developers in 2020, it has yet to present a comprehensive solution to the crisis. Local governments have also accumulated significant off-the-books debt, further complicating the country’s financial stability.
Xi has shown little interest in shifting the economic focus toward empowering consumers, as many economists suggest. His reluctance to increase social safety nets or encourage higher levels of household spending is a reflection of his belief that American-style consumption is wasteful. This has left millions of Chinese citizens struggling with limited economic opportunities, despite the country’s overall economic stature.
