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  • By The Financial District

China's Economy In Deep Trouble As Xi Pursues Wrong Policies: CNN

When Xi Jinping came to power a decade ago, China had just overtaken Japan to become the world’s second largest economy.

Photo Insert: China’s rapid technological advances have also made it a strategic threat to the United States and its allies.

With an average annual growth rate of 6.7% since 2012, China has seen one of the fastest sustained expansions for a major economy in history. In 2021, its GDP hit nearly $18 trillion, constituting 18.4% of the global economy, according to the World Bank (WB).

China’s rapid technological advances have also made it a strategic threat to the United States and its allies. It’s steadily pushing American rivals out of long-held leadership positions in sectors ranging from 5G technology to artificial intelligence.

Until recently, some economists were predicting that China would become the world’s biggest economy by 2030, unseating the United States. Now, the situation looks much less promising, Laura He wrote in an analysis for CNN Business.

As Xi prepares for his second decade in power, he faces mounting economic challenges, including an unhappy middle class. If he is not able to bring the economy back on track, China faces slowing innovation and productivity, along with rising social discontent.

All the news: Business man in suit and tie smiling and reading a newspaper near the financial district.

“For 30 years, China was on a path that gave people great hope,” said Doug Guthrie, the director of China Initiatives at Arizona State University’s Thunderbird School of Global Management, adding that the country is “in deep trouble right now.”

While Xi is one of the most powerful leaders China and its ruling Communist Party have seen, some experts say that he can’t claim credit for the country’s astonishing progress.

Government & politics: Politicians, government officials and delegates standing in front of their country flags in a political event in the financial district.

“Xi’s leadership is not causal for China’s economic rise,” said Sonja Opper, a professor at Bocconi University in Italy who studies China’s economy. “Xi was able to capitalize on an ongoing entrepreneurial movement and rapid development of a private [sector] economy prior leaders had unleashed,” she added.

Rather, in recent years, Xi’s policies have caused some massive headaches in China. A sweeping crackdown by Beijing on the country’s private sector, that began in late 2020, and its unwavering commitment to a zero-Covid policy, have hit the economy and job market hard.

Banking & finance: Business man in suit and tie working on his laptop and holding his mobile phone in the office located in the financial district.

“If anything, Xi’s leadership may have dampened some of the country’s growth dynamic,” Opper said.

More than $1 trillion has been wiped off the market value of Alibaba and Tencent — the crown jewels of China’s tech industry — over the last two years. Sales growth in the sector has slowed, and tens of thousands of employees have been laid off, leading to record youth unemployment.

Market & economy: Market economist in suit and tie reading reports and analysing charts in the office located in the financial district.

The property sector has also been bludgeoned, hitting some of the country’s biggest home developers. The collapse in real estate — which accounts for as much as 30% of GDP — has triggered widespread and rare dissent among the middle class.

Thousands of angry homebuyers refused to pay their mortgages on stalled projects, fueling fears of systemic financial risks and forcing authorities to pressure banks and developers to defuse the unrest.

Science & technology: Scientist using a microscope in laboratory in the financial district.

That wasn’t the only demonstration of discontent this year. In July, Chinese authorities violently dispersed a peaceful protest by hundreds of depositors, who were demanding their life savings back from rural banks that had frozen millions of dollars worth of deposits.

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