Xi Jinping's Economic Priorities

 

Xi Jinping's Economic Priorities

 

As Xi Jinping aims to position China as a global leader in manufacturing and technological innovation, the country's economic issues are intensifying. Growth is slowing, consumer spending is falling, and the real estate crisis is worsening.

 

The Third Plenum, a significant Communist Party event held every five years, often introduces major economic changes. However, this year, Xi appears to prioritize reducing dependence on Western technology and focusing on sectors like clean energy and advanced computing.

 

Despite efforts to boost factory investments, China's economic growth remains uneven. The second quarter saw a growth rate of 4.7%, down from 5.3% in the first quarter. While industrial production increased, retail sales rose only by 3.7%, highlighting weak domestic demand.

 

China's real estate crisis, now in its third year, has significantly impacted the economy. Property investment declined by 10.1% in the first half of 2024 compared to the previous year. New home sales fell by 26.9% in the same period, and average home prices in major cities dropped by 4.9%.

 

Local governments, burdened with massive debts, are struggling financially. Developers have halted land purchases, reducing a crucial revenue stream for cities. The central bank's $27 billion funding for developers remains largely untapped due to banks' reluctance to lend.

 

Xi's emphasis on manufacturing and exports has led to increased international trade tensions. Surging exports of electric vehicles and other products have sparked concerns in the U.S. and the European Union, reminiscent of the early 2000s "China shock."

 

Economists argue that more balanced growth, driven by increased domestic consumption, is crucial. Measures such as tax reforms and changes to the "hukou" system could boost local spending and support the economy. However, without significant policy shifts, China's economic imbalances are likely to persist.