Commentary
The 1983 film “The Year of Living Dangerously” tells the story of a journalist who faced intrigue and risk during the collapse of the Sukarno regime in Indonesia. Like this regime, the Chinese Communist Party (CCP) faces significant challenges to its legitimacy and the stability of Xi Jinping’s rule in 2025.
At the core of these challenges are the erosion of public trust, deepening economic crises, internal political purges, and rising social discontent. But external factors will also damage the CCP’s credibility, not the least of which is the new Trump administration’s focus on pushing back against Beijing’s trade and foreign policies.
Erosion of Trust
In broad strokes, one of the most profound threats to the CCP’s legitimacy is the erosion of public and political trust. The Chinese people are very aware of the state’s egregious abuses on multiple fronts and are pessimistic about the future. As a result, many Chinese, particularly the younger generation, are feeling alienated. This is partly because the Party has strengthened its control over nearly every aspect of Chinese society, at great expense to public opinion, and partly due to the lack of well-paying jobs.Beijing’s grand promise of so-called common prosperity, for example, has fallen short and revealed itself to be a wealth and power grab by the CCP. This erosion of trust also extends beyond social grievances and into the investment community. Investors’ loss of confidence in the CCP’s ability to reverse the economic decline and lead the country back to prosperity helps explain record levels of capital flight from China. Even global investment funds are avoiding Chinese bonds.
These financial events indicate serious long-term concerns about the sustainability of China’s financial system.
The erosion of trust is a critical challenge because the CCP’s legitimacy has always rested on its ability to provide economic growth and stability. Fewer Chinese believe that the CCP can do that. Hence, the trend of discontent isn’t new, but it is rising.
A Slew of Economic Crises
China’s deepening economic crises also weaken the CCP’s grip on power. Once lauded for lifting millions out of poverty, Beijing’s policies are the direct cause of China’s ongoing economic collapse. As noted, good jobs for young, educated Chinese are disappearing, and youth unemployment (ages 16–24) is at an all-time high. But that’s just a symptom of a deeper malaise.
The real estate sector, which has accounted for more than 30 percent of GDP, has been imploding for years and continues to do so. This has led to job losses and financial ruin for millions. At the same time, income and wages are down, making housing unaffordable.
What’s more, state-owned enterprises make up an estimated 28 percent of GDP and are mired in inefficiency and corruption. These and other economic obstacles have crushed consumer confidence and spending, causing stagnation and deflation in the domestic economy and slowing growth to its lowest levels in decades.
Compounding these internal crises is the growing capital outflow from China. Billions of dollars are leaving the country each month, driven by both Chinese elites and ordinary citizens seeking safer havens for their wealth. This outflow signals a lack of confidence in the Chinese economy and raises serious concerns about the sustainability of China’s financial system.
A weakening economy undermines the CCP’s core promise of prosperity, further threatening the Party’s credibility at home and abroad.
Political Purges: Strengthening Control at a Cost
Xi has consolidated his power more than any leader, even surpassing Mao Zedong. Like Mao, political purges that include the business, financial, and military spheres have become a hallmark of Xi’s leadership.However, as I noted in a previous post, they are also a source of fear, friction, and instability among even the highest officials. They are also a sign of Xi’s paranoia and insecurity. While many purged officials are believed to have been genuinely corrupt, others are believed to have represented potential threats to Xi’s power.
The repeating cycle of purges has created uncertainty within the Party itself, making effective governance more difficult.
Distinct but related to the purges is the aforementioned increase in the number of state-owned enterprises. As economic conditions worsened, the CCP resorted to taking over more private companies as a means of perpetuating its control over the economy and the populace. This is only accelerating the downward spiral.
Social Discontent
The social contract that secured the CCP’s legitimacy for decades—economic growth in exchange for political obedience—is unraveling. Despite its unrivaled surveillance state, social discontent is still a potent force. The grievances of the younger generation—which is deeply dissatisfied with life, their prospects, and the Party’s pervasive control—are bubbling to the surface.Consequently, a rising number of protests have erupted across the country in recent years.
Discontent within the political and military echelons is also rising. The Chinese regime has responded with increasingly harsh crackdowns and constructing hundreds of new detention centers. Doing so, however, may well undercut loyalty to Xi and his ability to govern.
External Headwinds Pose More Challenges
Given the Trump administration’s determination to push back against Beijing in trade, technology, and foreign policy, the rivalry between China and the United States will intensify in 2025. Decoupling from China is a top priority for the United States, and doing so will make economic growth more difficult for the CCP in 2025 and onward. Tariffs reaching 60 percent are on the table, as well as other trade policy options.But it isn’t just the United States that wants to decouple from China. Some countries in the European Union are wary of being reliant on China and seek to limit Beijing’s exports to the EU. Japan and South Korea are also cooperating to blunt Chinese trade and influence in the region and globally. The Taiwan question looms large, as does the Trump administration’s declaration to take back the Panama Canal and reduce Beijing’s influence there.
All of the above are but a few of the many external challenges the CCP faces in 2025, which may indeed be a pivotal year for the CCP, Xi, and the Chinese people.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
