China recently marked the 75th anniversary of the founding of the People’s Republic of China on October 1, 2024. This achievement signifies the longest tenure of a ruling communist party in history. Previously, the Soviet Union held this record, having maintained its communist regime for 74 years before its dissolution in 1991.
Unlike previous milestone celebrations, this year’s events were more subdued. The main event was a flag-raising ceremony in Tiananmen Square, accompanied by a speech from President Xi Jinping.
The anniversary was overshadowed by ongoing economic challenges and security concerns within the country. Despite these issues, President Xi emphasized the nation’s resilience and determination to overcome obstacles. Additionally, medals were awarded to individuals who made significant contributions to China’s development.
China’s economic growth was unparalleled after the implementation of open and reform policies in the 1970s and 1980s. Economic output per person increased by roughly 3,000% in recent decades, leading many analysts to describe China’s economic growth as a “miracle.”
However, growth has slowed in recent years, with the International Monetary Fund (IMF) projecting a deceleration to 3.3% by 2029. The Covid-19 pandemic posed unprecedented challenges. The strict lockdowns and zero-Covid policies implemented by the government, while initially effective in controlling the virus, but had severe economic repercussions. These measures disrupted supply chains, halted production, and significantly reduced consumer spending. The prolonged restrictions led to a slowdown in economic activities, making it difficult for the economy to regain its pre-pandemic momentum.
One of the main factors contributing to the country’s economic struggles is the downturn in China’s property market.
Since Xi Jinping took office a decade ago, real estate has been a key driver of China’s economic growth. However, a government crackdown on heavily indebted developers in 2020 led to falling house prices and defaults by weaker companies. This caused many developers to halt construction on pre-sold homes, leading some buyers to stop paying their mortgages. The ongoing decline in the property market has continued into 2024.
In May, China introduced a major plan to revive the market, including a 300 billion yuan ($43 billion) central bank fund to help government-backed firms buy unsold homes. Despite this, progress has been slow, with limited participation from local authorities.
To address this, the government introduced a stimulus package aimed at boosting the real estate sector. This includes increased bank lending, mortgage rate cuts, and lower down payments for second-home buyers. However, there is skepticism about whether these measures will be sufficient to revive the housing market.
During a Politburo session (a Politburo is the highest legislative body in a communist party), leaders committed to not only reducing interest rates but also utilizing government funds to stimulate economic growth.
Experts argue that new avenues of growth are essential for China to maintain steady economic progress. This includes expanding in emerging and transforming industries such as artificial intelligence, digital financial services, and green technologies like electric vehicles. In 2023, China’s expanding clean energy sector accounted for an estimated 40% of the country’s economic expansion. Additionally, private sector spending on research and development has doubled over the past five years.
Shifting to a “High Quality development”
In March, Chinese President Xi called for significant reforms to promote “high-quality development“, sparking heated discussions among the media and the public. Xi’s vision of high-quality development aims to meet people’s growing desire for a better life and reflects a new development philosophy featuring innovative, coordinated, green, open, and shared growth.
High-quality development involves shifting the growth model from crude to intensive, focusing on innovation. It will no longer be driven mainly by traditional factors such as labor, capital, and land but by new innovative factors like information technology, big data, and artificial intelligence. In 2017, Xi stated that China’s economy was transitioning from a period of rapid growth to a stage of high-quality development.
Lessons Learned from Japan
China can draw lessons from Japan’s economic history, particularly its “lost decade” of the 1990s when Japan struggled to return to the high growth rates achieved in the 60s, 70s and 80s. Japan’s economy boomed due to international trade, particularly with the US.
However, this led to employment crisis in the US as domestic industries were suffering due to the large amounts of imports, particularly in the automotive sector, from Japan. Violence culminated in the country with slogans of “Use American” echoing everywhere, leading to various trade measures and agreements aimed at curbing Japanese imports and addressing trade imbalances.
As a result of this, a strategy China is currently pursuing is developing an economy driven by domestic demand rather than foreign trade, a key component of Xi Jinping’s China 2025 plan. Unlike Japan, which remains one of the United States’ strongest allies, China does not have the same alliance role, which influences its economic strategies.
China’s economic growth target for this year is around 5%, in line with last year’s performance despite forecasts for a slowdown.
Xi Jinping’s Paranoia
The fall of the Soviet Union has been a recurring theme in Xi Jinping’s speeches, media campaigns, and party meetings. After 12 years in power, Xi remains deeply concerned with maintaining internal unity and preventing ideological drift within the Chinese Communist Party (CCP).
The fall of the Soviet Union was marked by economic struggles and political reforms initiated by Mikhail Gorbachev, which exposed deep-seated issues and sparked nationalist movements within various republics. A failed coup in August 1991 by hardline Communist Party members further weakened the central government’s authority. By December 1991, leaders of Russia, Ukraine, and Belarus declared the Soviet Union dissolved, forming the Commonwealth of Independent States (CIS). On December 25, 1991, Gorbachev resigned, and the Soviet flag was lowered for the last time, officially ending the Soviet Union and resulting in the emergence of 15 independent countries.
According to a report by the Economist, Xi Jinping views the collapse of the Soviet Union as a cautionary tale, attributing it not only to economic mismanagement but also to the loss of ideological and organizational discipline within the Soviet Communist Party.
Xi identifies Nikita Khrushchev’s 1956 “secret speech,” which denounced Stalin’s cult of personality, as a pivotal moment that initiated the Soviet Communist Party’s decline. According to Xi, this speech marked the beginning of the party’s descent into weakness and eventual dissolution. Determined to avoid a similar fate for the CCP, Xi has implemented stringent measures to maintain control and discipline within the party.
Under Xi’s leadership, China has witnessed an unprecedented crackdown on dissent. This includes the suppression of Hong Kong’s pro-democracy movement and the mass incarceration of Uighur Muslims in Xinjiang. Xi has also reinforced the party’s influence over every aspect of Chinese society, from tightening control over private enterprises to increasing censorship of the media and internet.
Manbilas Singh is a talented writer and journalist who focuses on the finer details in every story and values integrity above everything. A self-proclaimed sleuth, he strives to expose the fine print behind seemingly mundane activities and aims to uncover the truth that is hidden from the general public. In his time away from work, he is a music aficionado and a nerd who revels in video & board games, books and Formula 1.
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