In this year’s New Year’s address, Chinese leader Xi Jinping continued to portray China as being in a very favorable situation, although he acknowledged some difficulties. He highlighted significant achievements across various domains and affirmed the nation’s positive trajectory.
However, multiple indicators suggest that the situation in China is far from optimistic, accompanied by a discernible weakening of Xi Jinping’s authority. While economic data supports the former, the prevailing sentiment among the Chinese people signifies the latter. This view has been shaped by years of failed policies and intensified by Xi’s handling of the COVID pandemic, now extending beyond economic concerns.
The shift in China’s public opinion could have a significant impact on the country and the world, requiring careful observation.
Since assuming office, Xi Jinping has fervently sought to reaffirm the Communist Party’s legitimacy by championing the superiority of “Socialism with Chinese characteristics” over the Western liberal democratic system. This endeavor addresses an inherent contradiction in the rationale of the Communist Party rule.
Initially founded on the promise of constructing a utopian communist society, the party’s economic reforms, starting from Deng Xiaoping’s era, progressively embraced capitalist elements, yielding benefits for the Chinese people but diminishing the party’s leadership.
Should this trend persist, it will prompt the question of why the Communist Party remains in control when the economic system leans more towards capitalism than communism. Furthermore, the contradiction between the economic and political systems has greatly impeded China’s sustained and balanced development.
Xi took upon himself the mission to rectify this disparity by trying to demonstrate the superiority of socialism over capitalism. His goal was to harmonize China’s economic and political systems and to realize the “great rejuvenation of the Chinese nation” within this integrated framework.
During his first two terms, Xi embarked on a series of reforms, leveraging the economic gains from previous decades as a springboard. However, his policies have dissipated this economic foundation.
Notably, in August and September 2021, central policies instigated comprehensive overhauls across various industries, spanning from e-commerce, gaming and extracurricular tutoring to the real estate sector. Virtually every day witnessed devastation to a different industry. The Chinese population became concerned and confused, but the majority still maintained confidence in Xi.
Then, in April 2022, Shanghai residents mounted a large-scale protest against lockdown measures, sparking a ripple effect across other regions in China and ultimately compelling the Communist Party to abandon its zero-COVID policy.
This is significant because, during the initial two years of the pandemic, China’s stringent lockdown measures positioned it favorably in virus control compared to the West, leading to a prompt economic rebound. Xi strategically capitalized on this window to reinforce the narrative that China’s system is superior to that of the West. However, as the lockdown strategy faltered, the concept crafted by Xi began to crumble, marking the onset of his declining authority.
With Xi’s authority eroding, Chinese citizens are gradually asserting more independent thinking. Their resistance is silent, expressing itself through voting with their feet and money: not seeking employment, not buying homes, not consuming, not investing and not having children. Most significantly, there is a lack of interest in pursuing wealth through avenues that promise sustained development and stable profits.
Currently, the most profitable sectors in China thrive from economic downturns. A notable illustration is the dominance of live-streamed e-commerce platforms, where hosts showcase and sell products in real time, largely supplanting conventional distribution channels. This transition is driven by the growing reliance of Chinese consumers on e-commerce platforms for their cost-effectiveness.
The fierce competition in this industry ensures that only a handful of top hosts can effectively sell products, leaving business owners vulnerable to the whims of these platforms. Consequently, a relentless pursuit of lower prices ensues, resulting in a deterioration of product quality and customer service.
The dominant attitude in China emphasizes short-term gains, frequently disregarding the importance of brand development. Consumers tend to favor affordability over product quality, contributing to a general decline in consumption standards.
This trend reflects heightened financial insecurity among the Chinese population, rooted in a lack of confidence in anything beyond immediate profits, driven by uncertainties about government policies and the future trajectory of the Chinese economy.
Despite government efforts to inject cash into the economy, these funds remain largely stagnant in the banking system, pushing the overall economy into contraction. The prosperity of live-streamed e-commerce platforms serves as a stark indicator of the fragility of China’s real economy.
Another deterrent to investing in China is the uncertainty among private entrepreneurs about the ownership of their earnings. In response to Xi’s “Common Prosperity” initiative in September 2021, Tencent and Alibaba donated the equivalent of $70 billion and $140 Billion, respectively.
This amounts to a direct robbery of funds by Xi Jinping. The reality is that if the government hints at the necessity of donations, none of these private enterprises dare do otherwise.
Dissatisfaction with Xi has also permeated the military ranks. Multiple sources of mine indicate widespread discontent within the military toward the ruler. The anti-corruption campaign has significantly affected the ability of military personnel to generate income, and Xi has also curtailed military benefits. Consequently, grievances within the military are intensifying.
The Chinese Communist Party’s military structure is marked by factionalism. While outward compliance with Xi Jinping is maintained, there is an undercurrent of insincerity and passive resistance and the potential for more assertive actions. Xi Jinping’s recent personnel changes at the highest defense echelons underscore this sentiment and reveal the president’s lack of confidence in the military, offering another perspective on his diminishing authority.
As Xi Jinping’s authority shows cracks, changes are beginning to brew. China currently lacks effective solutions to bridge the economic gap resulting from the real estate sector’s collapse, and Xi’s policy tools have proven ineffective.
This year is anticipated to be exceptionally challenging for China, potentially heralding significant transformations for the country.
Simone Gao is an independent journalist and host of the online program Zooming In with Simone Gao.