A struggling economy, rising social tensions and the return of Donald Trump will test China’s leader
Publicado en The Economist, el 31 de diciembre de 2024
SOON AFTER he took power in 2012, Xi Jinping urged caution about China’s prospects. “The further our cause advances”, he told fellow leaders, “the more new situations and problems will arise, the more risks and challenges we will face and the more unforeseen events we will encounter.” As China’s economy flounders and social tensions rise—and with Donald Trump preparing to take over in the White House—the coming year will be replete with the kind of difficulties Mr Xi feared. As ever, the country’s murky politics may throw up surprises, too.
The possibility of Trump-induced tumult in the relationship between the world’s two strongest powers is a big and immediate worry. Decisions made by America’s next president and his mostly China-hawkish team will affect matters that Mr Xi regards as critically linked to the Communist Party’s grip on power. First is the economy. Mr Trump has threatened to impose a 60% tariff on imports from China, on top of an immediate 10% hike should China fail to curb exports to America of fentanyl, a potent synthetic opioid that kills tens of thousands of Americans annually. Some analysts say these increases could knock more than two percentage points off China’s economic growth.
There is much uncertainty about how fast the tariffs will be raised and whether Mr Trump is really determined to push them so high. But if imposed as advertised, they could deal a hefty blow to China at a time when the country is struggling to revive the badly battered confidence of households and businesses amid a property-market slump and scarcity of jobs.
Mr Xi would have no easy remedies. He may respond by beefing up the stimulus measures that he began unveiling in September, but the caution that has settled in among consumers and investors suggests that he may struggle to achieve the desired effect. He could allow the yuan to devalue against the dollar in order to make Chinese exports cheaper and keep them competitive despite extra tariffs. But that could further sap the confidence of investors and prompt capital flight. It may also exacerbate tensions with major trade partners—not least in the European Union—who are already nervous of what they see as China’s flooding of their markets with cheap goods.
Another year in the economic doldrums, with policymakers uncertain how to respond as they struggle to interpret signals from Washington, would turn citizens gloomier. In 2024 their stress became more evident. One sign was a rise in random acts of violence against members of the public, dubbed “revenge on society” attacks by China’s state media. These have often involved knifings and the driving of cars into crowds. The party is clearly worried. Officials have called for such cases to be dealt with “severely, strictly and swiftly”: a phrase that often heralds brutal justice with hasty, pro-forma trials that result in long jail terms or executions.
The party’s just getting started
In 2025 expect the term “social work” to feature prominently in party rhetoric. This is not so much about promoting social justice or providing services for people in need. It is mainly about ensuring social order by strengthening the party’s grassroots control. Mr Xi set the tone in November at the first meeting of the Central Social Work Department, which was formed in 2023. He said its functions were “vital to the party’s long-term governance, the country’s enduring peace and stability, social harmony and stability, and the well-being of the people”. The department’s work could entail ramping up efforts to ensure that party committees use their voice in the management of private firms, and that they keep the authorities informed of anything that could trigger unrest. With many firms freezing or cutting wages, or laying people off, to cope with economic challenges, the party wants eyes and ears in every workplace.
State media occasionally admit that troubles are brewing. In December Xinhua, the government’s main news agency, referred to a “complicated and challenging environment of increasing external pressure and growing internal difficulties”. But at the annual session of China’s rubber-stamp parliament, the National People’s Congress (NPC), which will begin on March 5th and last for several days, delegates will be under pressure to sound upbeat (and Chinese journalists to avoid any coverage that might suggest pessimism). As Mr Xi recently said: “To do a good job of next year’s economic work, we must first firmly establish confidence in victory.”
Much attention will be focused on the target for economic growth in 2025, which will be announced at the meeting. To bolster confidence, the government may repeat the goal for 2024 of “around 5%”. Officials’ recent calls for “extraordinary” efforts to buoy the economy suggests they are preparing to aim high. One such measure, which may be announced at the session, could be an increase in the headline budget deficit from about 3% of GDP to 4%, according to Reuters, a news agency. This would mean extra government spending of about 1.3trn yuan ($179.4bn), it reckons.
The NPC is likely to gloss over politics. Yet persistent turmoil at the top of the armed forces will be on the minds of many of the nearly 3,000 delegates, about 280 of whom are military personnel. In November Admiral Miao Hua, who ranked fifth in the armed forces’ high command, was placed under investigation for “serious violations of discipline”—a frequent euphemism for corruption. Admiral Miao was believed to be close to Mr Xi. By targeting him, Mr Xi may be trying to show that no one enjoys protection from his war on graft. But it also raises questions about the strength of his control over the People’s Liberation Army.
Admiral Miao is the highest-ranking of more than a dozen senior officers who have been toppled in the past year and a half. Among them are a former deputy commander of the ground forces and a former naval chief of the military region that includes the South China Sea. Their removal from the NPC was announced on December 25th. The purges may continue. The fate of the defence minister, Admiral Dong Jun, will be closely watched. He is believed to be a protégé of Admiral Miao. China has dismissed reports that he is in trouble, too, and he continues to meet foreigners. But he could be on shaky ground. His two predecessors, Li Shangfu and Wei Fenghe, were expelled from the party in June for alleged corruption.
China first
With so much bothering him at home, Mr Xi may be disinclined to take big risks abroad. He would probably prefer to stand back while Mr Trump tries to secure peace in Ukraine. The war complicates China’s relations with Europe (which resents China’s supply of tech to Russia’s arms factories), but it helps China by sapping Western resources. When Mr Trump takes over, the question of how to handle Ukraine could cause tensions between European countries and a more isolationist America: the kind of feud that China likes. Mr Xi will keep trying to browbeat Taiwan as well as rival claimants to territory in the South China Sea, though he will probably seek to avoid conflict that could drag in America. Mr Trump boasts of being war-averse, but Mr Xi may not fully trust him to steer clear.
As Mr Xi sees it, risks at home and abroad can become entwined in dangerous ways. “If we do not take preventative measures or address them properly,” he told senior officials in 2016, “they will add up, escalate and evolve, from minor ones to major ones, from regional ones to systemic ones, and from international ones to domestic ones…eventually threatening the party’s governance and state security.” China’s biggest festival, the lunar new year, will start on January 29th. It will be the year of the snake. Mr Xi may want to tread warily.