Challenges and Prospects of China’s Future under Xi Jinping’s Leadership
The remarkable economic ascent of China from 1978 to 2016 unfolded in a supportive global landscape, characterized by international efforts to integrate China into the global system. However, a paradigm shift occurred in 2017 with the election of Donald Trump in the United States, marking a departure from the previous international consensus.
In the current global milieu, there is a prevailing narrative of containing China, presenting challenges for the nation’s future evolution. Internally, China faces a changing societal landscape, with the younger generation exhibiting a declining work ethic and diminished enthusiasm for hard work to achieve material gains. This internal shift raises concerns about China becoming a fatigued society, exacerbated by a rapidly aging population.
China’s economic strategy, characterized by a construction- and investment-driven growth model, has reached its limits. The imperative now is to transition towards a productivity and consumption-driven economy. However, achieving this transformation necessitates addressing deep-rooted issues such as corruption, inequality, and bad debt accumulated during the earlier phase of development.
Initiating the required cleanup, however, proves challenging, particularly in tackling established insiders who have amassed significant wealth under Xi Jinping’s leadership. Concurrently, China faces external challenges, including unprecedented trade wars, realignment of global supply chains, and mounting financial pressures from bad debts associated with the Belt and Road Initiative.
Xi’s push for common prosperity and efforts to reallocate wealth may have significant economic implications, influencing the country’s power structure and military modernization. Nevertheless, building trust for foreign investments becomes crucial for China’s success in transitioning to productivity and consumption-driven growth. The nation’s historical shortcomings in protecting intellectual property rights and mercantilist economic policies have strained relations with foreign investors and research institutions.
Additionally, the “Common Prosperity” narrative necessitates investments in neglected rural areas, challenging the traditional exploitation of unskilled workers that contributes to China’s low-cost production advantage. The recent crackdown on successful technology companies adds a layer of uncertainty, discouraging entrepreneurship and fostering a risk-averse business environment.
China’s transition from an open environment for vigorous debate to a more propagandistic society, marked by surveillance and restrictions on public discourse, raises concerns about fostering innovation. The fear of repercussions for diverging from party ideology creates a risk-averse atmosphere, hindering dynamic policy implementation.
Internationally, China’s border tensions with India, harsh treatment of Australia, claims in the South China Seas, hard handling of many countries in Belt and Road Initiative dealings, and untruthful handling of the Covid outbreak in Wuhan have eroded its soft power and led to increased international isolation.
As China grapples with the challenges of transitioning to a new economic model, political and financial pressures may intensify, compounded by an aging society. The current economic environment is akin to a receding tide, revealing vulnerabilities and contradictions in China’s political economy. The absence of a clear succession plan for Xi Jinping further adds to the uncertainties surrounding China’s future trajectory.