Xi Jinping Thought on Austerity With Chinese Characteristics

3 mins read
August 31, 2023
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In a recently published speech in Qiushi, the Communist Party’s leading journal, Chinese President Xi Jinping voiced his opposition to Western-style stimulus measures, which Former Premier Li Keqiang and other party members share.

Why it matters: This decision and its subsequent publication come amidst new data revealing the ongoing weakening of China’s economy and seem to be a strategic response to increasing calls, both domestically and internationally, for Beijing to bolster its economy, mainly through a fiscal package aimed at households rather than government projects.

The big picture: Though the speech was initially made in February, it was deliberately publicized after the release of recent economic data, according to sources familiar with Beijing’s decision-making process. This move reinforces the narrative that Beijing is resisting pressure to adopt Western economic recovery models despite its economic challenges.

China’s economy is under significant stress, with recessionary and deflationary pressures mounting. Early August data showed a 14.5% decrease in exports and a 12.4% decrease in imports in July, marking the steepest decline since February 2020. This decline severely affects China’s growth prospects and overall economy, as exports are a crucial growth driver.

China’s Experts Have Solutions

Beijing must take bolder steps to boost output, including promoting consumer spending and supporting China’s families with cash handouts. Experts like Cai Fang and Liang Jianzhang advocate shifting to a more consumer-led economy to promote sustainable growth and address population decline.

  • Cai Fang: A prominent member of the monetary policy assembly at the People’s Bank of China urges decisive action to boost citizens’ income amid post-pandemic unemployment. They suggest a 4tn yuan ($551bn) injection into households to counter wage stagnation and reforms to enhance the purchasing power of migrant workers.
  • Liang Jianzhang: a tenured professor from Peking University, recommends increasing China’s ferlity rate, that China should allocate 10% of its GDP in direct stimulus to families.

Old Guard’s Grip

Even if he wanted to take their advice (he doesn’t), Xi Jinping faces systemic challenges in addressing the crises in China due to the influence of princelings and the authoritarian nature of the Communist Party. This obstructs the effectiveness of economic recovery measures, and officials prioritize self-preservation over adopting more effective solutions.

Our Prediction:

As the economy worsens and China’s population collapses, the power of propaganda weakens, and fears of purges might spur the anti-Xi faction to launch bolder attacks. Xi’s early refusal will become an inability to spend political capital on a much-needed massive direct stimulus and family policy.

This doesn’t necessarily mean that China or the CCP will fall apart, but both will rot like China’s youth. Akin to other victims of austerity like Italy, Greece, and the U.K., but at a quicker and more brutal pace.

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