China: Economic crisis exacerbates social and political tensions

China is experiencing the biggest economic crisis in 50 years, against a backdrop of intense economic and military pressure from the United States: "China is caught up in the global dynamic of the crisis, with its financial system threatened by the bursting of the property bubble. The decline of its Russian partner and the disruption of the “Silk Roads” towards Europe by armed conflict or the prevailing chaos are causing considerable damage. The powerful pressure of the US further increases its economic difficulties. And faced with its economic, health, ecological and social problems, the congenital weakness of its Stalinist state structure is a major handicap" [1].

In such a context, the plunge into the red of the country's main economic indicators can only be of the utmost concern to the Stalinist state party-state. Economic growth is at its lowest for 45 years (less than 5%), exports are falling (-8.3% year-on-year) and domestic consumption is anaemic. While domestic demand is in a deflationary spiral, government debt - particularly that of the regional authorities - and corporate debt are colossal. China's public and private debt, which exceeded 250% of GDP in 2021, will reach 300% of GDP by mid-2023 (according to the Bank for International Settlements in Basel, Switzerland). The catastrophic scale of the problems is particularly evident in the property sector, which accounts for almost 30% of China's national GDP: after the bankruptcy of Evergrande and the default announced for Country Garden, which has 4 times as many projects as Evergrande, there were 648 million unsold housing units at the end of August.[2]. As a result, the banking and credit system is under pressure in the face of a crisis of consumer confidence and a wait-and-see attitude on the part of the business community, which is holding back from investing while it waits to see what happens next.

Even more worrying for the Chinese bourgeoisie is the flight of capital, the fall in foreign investment to its lowest level for 25 years, which Beijing is trying to stem with massive campaigns aimed at investors. However, Xi Jinping's re-election and his treatment of "private Chinese entrepreneurs" such as Jack Ma (Grupo Ant and Alibabá), many of whom have had to flee to Japan, do not inspire confidence. The flight of capital to other countries such as Vietnam, Indonesia, India and Mexico is not just an expression of the lack of "guarantees" in China; transport costs and wages there have soared, so that today India and, to a lesser extent, Vietnam and other Indo-Pacific countries are competing with China: "Everyone either wants to sell their operations in China or, if they produce in China, they are looking for alternative places to do it. [This situation] is dramatically different compared to just five years ago"[3].

In short, far from being the engine that revived the global economy in 2008, China is experiencing a deep economic crisis that threatens to drag the rest of the world into further economic turmoil, and whose social impact is increasingly being felt within the country itself. The collapse of the property market is leading to demonstrations by small savers, who are seeing their life savings go up in smoke. The employment situation for young people is just as worrying: 21.3% of young Chinese are unemployed, according to the latest official figures (17 July 2023). In fact, according to local economists, the unemployment rate among 16-24 year-olds is twice as high (46.5% instead of 19.7% in March!), given that almost 20% of young urban dwellers are "tangping" (literally. "lying around"). The Chinese government is manipulating the publication of figures for fear of panicking investors, which would further exacerbate the current crisis and even threaten social and political stability. Social discontent is in fact growing after years of inhuman confinement linked to the "zero Covid" policy and the new healthcare regulation measures. Economic and social destabilisation is also exacerbating workers' struggles against wage arrears and factory closures or relocations, which often lead to violent confrontations with company security services. These strikes and protests increased sharply in 2023, doubling the number recorded in 2022 [4].

This deterioration in the economic and social situation is also causing political upheavals that are increasingly visible right up to the very top of the State, such as Xi's conspicuous absences from international forums (the BRICS economic forum in South Africa, the G20 meeting in India) and the "disappearance" of foreign affairs minister Qin Gang and defence minister Li Shangfu, as well as several generals heading up the "Missile Force" and the Chinese army's equipment development department. The ousting of leaders close to Xi and appointed by him after the last CCP Congress for reasons of "personal conduct" or "corruption" underlines the fact that Xi Jinping is increasingly being held personally responsible, particularly since his catastrophic "zero Covid" policy, which has caused considerable economic and social damage. In August, he reportedly came in for sharp criticism at the traditional summer meeting of the regime's top brass in the seaside resort of Beidaihe, where an assessment of the state of China is drawn up. Retired former leaders are said to have reproached him with a virulence never seen before, which seems to indicate that confrontations between "economists" and "nationalists" are once again intensifying in the face of the danger of economic and social destabilisation that frightens this Stalinist regime. A poisonous atmosphere and extreme tensions have developed within the CCP. In such a climate of factional fighting within the party-state, the future is uncertain and Xi could use the lever of a headlong rush into exacerbated nationalism to impose himself, as has often been the case in China when domestic problems accumulate.

XI Jinping's "Greater China" project, which he hoped to consolidate by 2050, now appears to be under serious threat: current trends indicate that the country will not become the world's leading economic power in the foreseeable future. Faced with an economic and financial crisis that threatens to plunge the country into widespread social chaos, increasingly crushing pressure from the United States and growing opposition within the party, Xi's policies will be marked more than ever by unpredictability, but also by the risk of irrational decisions that threaten to drag the world into a whirlwind of chaos, barbarism and unprecedented military confrontation.

Fo & RH, 9.10.2023 

 

[1] Resolution on the International Situation, 25th ICC Congress, International Review no. 170, 2023.

[2] See : P.-A. Donnet, Chine : comment la folie des grandeurs mène l'économie à la ruine, Asiayst, 01.10.23

[3] A British portfolio management specialist, quoted in P. Donnet, Chine : la crise économique, prélude d'un hiver politique et social ? Asialyst, 07.09.23)

[4] See : China Labour Bulletin