When I lived in Hong Kong a decade ago, the consensus among economists and journalists (and anyone else paying much attention) was that China would continue to grow at a breakneck pace and overtake the United States as the world's largest economy by 2030.
That prospect hasn't been fully dashed, but the promise of China's rise looks far shakier now.
Here's the thing: On Tuesday, China was scheduled to publish key economic data, including the closely watched GDP growth. But it didn't. The country's leadership, which gathered in the capital for the twice-a-decade Communist Party congress, canceled the publication and gave no indication of the reason for the change. Nor did it set a new publication date.
Separately, the country's customs authority also postponed the release of monthly trade data, which were initially scheduled to come out on Friday.
Those highly unusual moves could rattle investor confidence. And many analysts say it reflects a growing secrecy by Beijing that's making it harder to assess China's economy. Naturally, observers are wondering what's in the official economic data that the party doesn't want the public to see.
Most economists expected the GDP figure to come in around 3% — better than the previous quarter's reading, but well below Beijing's 5.5% target.
Let's step back: Xi Jinping, China's most formidable leader since Mao Zedong, is beginning his third five-year term as the country faces mounting economic challenges, including an unhappy middle-class, my colleague Laura He writes.
In recent years, Xi's heavy-handed crackdowns on dissent, corruption and private enterprise have taken a toll. See here:
- 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 has slowed, and tens of thousands of employees have been laid off, leading to record youth unemployment.
- 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.
"China's growth during Xi's decade in power is attributable mainly to the general economic approach adopted by his predecessors, which focused on rapid expansion through investment, manufacturing, and trade," said Neil Thomas, a senior analyst for China and Northeast Asia at Eurasia Group.
"But this model had reached a point of significantly diminishing returns and was increasing economic inequality, financial debt, and environmental damage."
Xi is trying to change that model, but there are serious doubts about his strategies of wealth redistribution, cracking down on private businesses and broadly becoming more nationalistic and insular.
The International Monetary Fund recently cut its forecast for China's growth to 3.2% this year. That would be its second-lowest growth rate in 46 years, better only than 2020 when the initial coronavirus outbreak pummeled the economy.
BOTTOM LINE
Ten years on, Xi's China is richer, stronger and more confident than ever, yet it is also more authoritarian, inward-looking and paranoid, my colleagues Nectar Gan and Simone McCarthy write. It has bolstered its international clout, at the expense of its relations with the West and many of its neighbors.
Any hopes that Xi would bend toward a more progressive vision of China have been stamped out as he has cemented his grip on power. Whether Xi can maintain that grip without choking off growth and crippling the economy will be the fundamental question of his third term.
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