Xi Jinping reached far beyond his predecessors to assert Chinese power on a global stage—economically, diplomatically, and militarily—and did so aggressively. He managed some successes but, in the process, also managed to turn Western and Japanese goodwill into distrust and hostility.
Now, he finds himself presiding over the worst Chinese economic performance in decades.
Orders figures included in the report on manufacturers show a decline from both domestic and foreign buyers. The latter reflects the economic weakness in both Europe and the United States, brought on no doubt by anti-inflationary monetary policies, especially interest rate increases.
The drop in foreign orders to Chinese producers also reflects the growing distrust of Chinese sources shown by Western governments as well as business communities in both places. Indeed, export figures from Beijing’s General Administration of Customs show the weakness. To be sure, the figure for September—the most recent number available—was about 5 percent above August levels, but September was still about 10 percent below the level of January, and given the more recent purchasing manager’s report, will likely show a decline when the October figures become available.
Order declines from domestic buyers echo the export weakness, at least in part. China, after all—and despite endless Beijing rhetoric about the economy becoming more domestically oriented—remains very much an export-driven economy. Domestic activity also depends on how much the foreigners are buying.
More than this effect, declining domestic orders also result from a widespread hesitation among private Chinese firms to expand capacity, a legacy of both the uncertainties brought on by years of Beijing’s zero-COVID measures and the outright hostility that Mr. Xi has recently displayed toward private business.
Beneath these disappointing economic statistics is the ongoing impediment to growth presented by the failure of major property developers—Evergrande and Country Garden. For one, the losses in finance imposed by the inability of this giant economic sector to meet its obligations have limited how much the financial system can support new ventures. For another, the uncertainties surrounding these losses have kept down homebuying by Chinese households.
To be sure, new home sales, after a multi-year slide, have of late picked up above the August lows, but at the equivalent of $55.6 billion in October, according to the China Real Estate Information Corp., they remain some 30 percent below year-ago levels and still below peak levels from before the pandemic.
In the face of this disturbing news, Beijing, after waiting much too long, has, at last, stirred itself to promote economic growth. So far, the effort seems to be too little, too late. To encourage more borrowing and more spending by both individuals and businesses, the People’s Bank of China has cut interest rates. These monetary moves have, however, been so timid—only fractions of a percentage point—that it’s hard to see how they can make much difference against powerful forces discouraging consumer spending and business investment.
Beijing has also launched programs to spend more on infrastructure, China’s default means of stimulating the economy. The latest effort authorizes borrowing of 1 trillion yuan, the equivalent of about $137 billion, to finance more projects, especially in flood-ravaged provinces. Given the tepid efforts so far, it’s reasonable to question whether this is enough in an economy that’s the equivalent of about $18 trillion.
When Mr. Xi took power in China about a decade ago, the nation seemed to be on track to overtake the U.S. economy in both size and strength. China was widely expected to become the dominant player on the world stage. Mr. Xi made it clear that such was his ambition for his country.
Since then, China has made some progress on these fronts, but the engine supporting the entire effort—the economy—is faltering. Now, the future looks less promising than it once did and certainly seems poised to fall short of Mr. Xi’s ambitions.
