The CCP appears to be more preoccupied with internal political conflicts than effectively addressing the economic challenges at hand.
Commentary
Despite announcing new measures to bolster its slowing economy due to reduced domestic demand and escalating export tariffs, Beijing’s recent press conference held by its top economic body failed to inspire market confidence.
The National Development and Reform Commission (NDRC) organized a press conference on Oct. 8 to highlight its “comprehensive implementation of incremental policies.”
On the same day, the Hong Kong stock market experienced a sharp drop of over 2,300 points, while mainland stock markets initially rose but quickly lost momentum.
The World Bank also forecasted a decline in China’s economic growth from 4.8 percent in 2024 to 4.3 percent in 2025, adding further strain to the East Asian region.
Related Stories
The press conference organized by the NDRC seemed well-coordinated. On Sept. 26, the Politburo of the Chinese Communist Party (CCP) deliberated on the current economic situation and future steps for economic initiatives, leading to a series of incremental policies. Subsequently, on Sept. 29, China’s State Council convened to focus on the implementation of these policies. Despite the anticipation built around the press conference, where five top officials of the NDRC were present, the outcome fell short of expectations for substantial stimulus measures.
However, the actual presentation was underwhelming.
The incremental policies lacked specificity, with officials mentioning that most of the 6 trillion yuan ($843 billion) state investment had already been allocated to specific projects. Nevertheless, they evaded questions from a Reuters reporter regarding the scale and objectives of the stimulus package. Additionally, Chinese officials vaguely expressed “full confidence” in achieving this year’s economic growth target of 5 percent.
The Politburo meeting on Sept. 26 did not result in significant economic decisions. The authorities continue to lack a clear strategy and effective solutions to tackle China’s economic woes. They appear indecisive, focusing on short-term fixes rather than long-term strategies.
The People’s Bank of China (PBOC) had announced substantial policies on Sept. 24, raising hopes for a large-scale stimulus akin to the 4-trillion-yuan ($566 billion) package introduced in 2008. However, these expectations were unmet, exacerbating the economic outlook for China.
So why has the CCP refrained from initiating a comprehensive economic stimulus plan?
I believe there are three primary reasons.
Firstly, the authorities are deeply apprehensive about the economic downturn, exacerbated by uncertainty about its severity.
China’s external economic landscape is expected to become more challenging, with potential threats such as proposed tariffs by former U.S. President Donald Trump. Beijing must prepare for such scenarios, leading them to safeguard their financial reserves.
Secondly, China’s current economic challenges surpass those of the 2008 global financial crisis, making it harder for the CCP to offer support, even if desired.
- In 2008, China’s GDP was about 30 trillion yuan ($4.2 trillion), and by 2023, it had reached 126 trillion yuan ($17.8 trillion), making economic rescue efforts more challenging.
- In 2008, M2 (a broad money supply measure) was 47.5 trillion yuan ($6.7 trillion); by the end of 2023, it had nearly reached 300 trillion yuan ($42 trillion), limiting further monetary expansion.
- In 2008, household debt was below 18 percent; by June 2024, it had surged to 62.6 percent.
- By the end of 2008, local government debt was around 5 trillion yuan ($707.6 billion), maintaining a similar balance; by 2023, the outstanding explicit debt of local governments had risen to 40.74 trillion yuan ($5.7 trillion), with a total issuance of 9.34 trillion yuan ($1.3 trillion) in local government bonds throughout the year.
- By the end of 2008, China’s national debt stood at approximately 5.33 trillion yuan ($754 billion), with an issuance of about 854.9 billion yuan ($121 billion) that year; by the end of 2023, national debt had climbed to 30.03 trillion yuan ($4.2 trillion), with a total issuance of 11.14 trillion yuan ($1.57 trillion) for that year.
Thirdly, the State Council faces internal strife and a weakened state due to infighting among members.
Since the CCP’s 20th National Congress in 2022, new members of the State Council, including Premier Li Qiang, have had limited influence at the top echelons. Moreover, the consolidation of power by CCP leader Xi Jinping has further diminished the authority of the State Council.
Moreover, following Xi’s consolidation of power at the 20th National Congress, his associates—who had cultivated personal ties with the CCP leader during his previous posts in Fujian, Zhejiang, and Shanghai—have aligned themselves with various political factions. Li is affiliated with the Zhejiang faction, while Vice Premier He Lifeng belongs to the Fujian group. These factions engage in fierce competition for advantages and interests, often unwilling to compromise. The internal divisions and conflicts within the State Council are exacerbating the economic situation.
For instance, during a meeting on Oct. 8 chaired by Li, Executive Vice Premier Ding Xuexiang was conspicuously absent, as was He, the vice premier responsible for the economy, who had traveled to Xinjiang the day before. This indicates a lack of support for Li from his colleagues.
The failure to follow through on the significant stimulus policies announced by the PBOC, the National Financial Regulatory Administration, and the China Securities Regulatory Commission suggests that the CCP’s economic stimulus measures are largely superficial. The CCP appears more preoccupied with internal power struggles than addressing economic challenges, further complicating China’s predicament.
Opinions expressed in this article are solely those of the author and do not necessarily reflect the views of The Epoch Times.
