Illustration: China's economy continues to decline. (Photo by China Photos/Getty Images)
[People News] Between August 22 and 25, 2026, the People's Daily published a series of articles over four consecutive days, all signed by "Zhong Caiwen." This pen name is a homophone for the Central Committee of the Communist Party of China’s Financial and Economic Affairs Commission, and it is typically used to deliver authoritative economic narratives that reflect the central leadership's views during critical moments, major meetings, or policy announcements. The articles either summarize past economic efforts and draw conclusions, provide directional guidance for future economic work, or they respond to widespread economic policy debates with general official statements, thus playing a crucial signaling role.
The titles of Zhong Caiwen's four articles are "The Resilience and Vitality of the Chinese Economy," "China as a Positive Contributor and Strong Stabilizing Anchor to World Economic Growth," "What Does a 4.7% Economic Growth in the First Half of the Year Indicate?" and "Promoting High-Quality Development for Steady and Long-Term Progress." From the titles alone, it is evident that these articles are not primarily focused on economic issues but rather on political matters, as they defend the government's economic policies and political stance in line with the Communist Party's political narrative. The titles suggest that the Chinese economy is flourishing and full of momentum; it not only resolves domestic challenges but also plays a significant role as a contributor and benchmark for global economic development. It seems that the stability of the world economy is contingent upon the Chinese economy, which is undergoing a significant structural transformation, moving towards new and improved directions, and is leading the global economic development trajectory.
Zhong Caiwen's series of articles is more accurately attributed to Xi Jinping himself than to the Central Financial and Economic Affairs Commission. Instead of merely promoting an optimistic view of the Chinese economy, these articles seem to serve as a defense of Xi Jinping's unsuccessful economic policies.
The backdrop of these articles is quite telling. According to data from the National Bureau of Statistics and the central bank, the macroeconomic and financial indicators for July revealed widespread weakness: the year-on-year growth of industrial added value for large enterprises was only 4.5%, down from the previous figure of 5.3%, marking a decline of 0.6%. Retail sales of consumer goods increased by just 0.6% year-on-year, significantly below expectations. From January to July, fixed asset investment fell by 6.7% year-on-year, while investment in real estate development dropped by approximately 19%. Domestic demand remains sluggish, highlighting a stark contrast between strong supply and weak demand, and RMB loans continue to decline. The GDP growth rate for the first half of the year was 4.7% year-on-year. Based solely on these macroeconomic figures, such a performance is far from what one would expect from a healthy and growing economy. Nevertheless, the authorities still classify it as being 'within the annual target range of 4.5% to 5%', 'hard to come by', and 'consistent with potential economic growth rates', while largely avoiding discussions about the economic fundamentals or finding ways to sidestep them.
In contrast, Zhong Caiwen's series of articles particularly highlights that new driving forces contribute over 40%, focusing on economic highlights such as artificial intelligence, green industries, and service consumption. It clearly indicates that the convergence of financial risks, the strengthening of energy security, and the upgrading of the foreign trade structure bolster economic resilience. Furthermore, it asserts that the policy toolbox is ample, and the benefits of reform along with the potential of a super-large market, will assist in achieving the annual targets. The article continues to emphasize the GDP target as a significant political task, and the notion of an 'ample policy toolbox' suggests that while there may be talk of action, actual results are lacking. It remains unclear what is meant by 'dividends from reform.' The Chinese Communist Party is currently facing fiscal constraints, struggling to pay civil servant salaries, having already exhausted the common populace, and is now targeting the wealthy, attempting to prevent capital flight and rigorously pursuing tax collection from Chinese citizens both at home and abroad. The benefits accrued from forty years of reform and opening up have long been depleted under Xi Jinping's leadership. The so-called potential of a super-large market likely refers to residents' savings, which serve as the last financial lifeline and reserve for the populace to navigate the harsh realities under Xi Jinping's governance. Regardless of the market's potential, it remains stagnant in the face of Xi Jinping's political pressures.
Zhong Caiwen's latest article appears to emphasize 'enhancing counter-cyclical adjustments', 'planning incremental policies', 'expanding domestic demand', and 'addressing inward competition'. This suggests that the Chinese Communist Party (CCP) is attempting to reassure the market and unify public sentiment, as part of its political mobilization and setting the tone ahead of the upcoming 20th Central Committee's Fifth Plenary Session and the initiation of the '14th Five-Year Plan'. However, the underlying message is clear: the CCP has reluctantly accepted approximately 4.7% as the potential economic growth rate that aligns with current factor supply, technological advancements, and institutional conditions, moving away from the previous insistence on maintaining a 5% growth target and abandoning hopes for large-scale fiscal stimulus to drive growth. Over the past two years, despite multiple rounds of stimulus policies, growth has proven to be ephemeral; the CCP's economy is now stagnant. The enormous debts of local governments, the contraction following the burst of the real estate bubble, declining marginal returns on investment, and the ongoing deterioration of employment rates are all factors that are undermining the CCP's economy. Zhong Caiwen vaguely attributes these issues to the costs associated with economic transformation. Consequently, the article indirectly informs the market that the so-called counter-cyclical adjustments are not a result of structural imbalances in the economy, but rather stem from cyclical execution points, indicating that strong stimulus measures are unnecessary and that it is sufficient to maintain pressure and continue moving forward.
The article presents a stark contrast between the politically prioritized narrative and the actual K-shaped economic reality in China. In July, high-end manufacturing, equipment, and high-tech industries experienced a year-on-year increase of 16.9% in added value for high-tech manufacturing, supported by relatively strong exports and accelerated growth in some new productive forces. However, at the same time, ordinary household consumption, private investment, real estate, local finances, small and medium-sized enterprises, and the employment market are all on a downward trend, as noted by Alexander. The issues of youth unemployment, deteriorating income expectations, and wealth erosion due to falling housing prices, combined with fiscal tightening during the local government debt resolution process, have resulted in a sharply contrasting macroeconomic divergence. The weakness in domestic demand highlights structural problems within the economy: residents are hesitant to spend, businesses are reluctant to invest, and local governments lack the funds to allocate. The underlying issue of strong supply coupled with weak demand stems from a cooling of market confidence, collapsing expectations, and stagnation in income growth for residents, which is a direct consequence of excessive investment and the supply-side economic model that Xi Jinping favors.
The central tenet of Xi Jinping's economic policy is the long-term prioritization of 'political security' over economic growth. The government's ongoing suppression of private enterprises serves as a benchmark for Xi Jinping's evaluation of local adherence to the 'state advances, private sector retreats' and 'common prosperity' policies. Concepts like 'self-reliance' and 'new quality productivity' are framed as integral to market dynamics. This includes the rectification of Ant Group, the education and training sector, and internet platforms, as well as the strict enforcement of the 'three red lines' in real estate and the 'housing is for living, not for speculation' principle. The costs incurred during three years of a zero-COVID policy, along with a focus on national security, self-sufficient industrial chains, and competition with the United States for technological and regulatory leadership, have collectively constricted the operational space for the private economy in a remarkably short time. This has undermined entrepreneurial confidence and accelerated the outflow of capital and talent, effectively nullifying the marketization, rule of law, and internationalization benefits accrued over more than four decades of reform and opening up.
The central government has largely attributed the responsibility for these issues to local governments, citing repeated construction efforts, misaligned performance metrics, and a failure to accurately interpret central directives. However, this approach sidesteps the fundamental problems with the top-level design itself: when central policy signals fluctuate between 'risk prevention' and 'stabilizing growth', when the private sector transitions from being viewed as 'one of us' to a group that requires repeated affirmations of 'two unwavering commitments' to maintain a semblance of stability, and when growth targets are systematically revised downward and redefined as 'potential growth rate', these developments reflect a failure of policy and institutional contraction, rather than merely local execution errors.
Zhu Rongji passed away on August 12 and was cremated on the 18th. As a pivotal figure in advancing state-owned enterprise reform, restructuring the financial sector, facilitating China's entry into the World Trade Organization, and promoting marketization and openness, his death has stirred collective memories of the previous reform era. People find themselves comparing the prosperity of the economic upturn during that time with the current economic challenges faced under Xi Jinping's leadership.
In the wake of his passing, state media quickly rolled out the 'Zhong Caiwen' series, highlighting that the current achievements are 'hard-won', risks are manageable, and resources are adequate. This appears to be a clear defense of Xi Jinping's economic policies amid criticisms of their failures, as well as an effort to deflect blame from him. Lessons from the reform era suggest that acknowledging issues, respecting market dynamics, expanding openness, and providing stable expectations for the private sector can unlock growth potential. However, the prevailing narrative today prioritizes national security, regime stability, and national rejuvenation over economic concerns, with political considerations taking precedence over economic calculations. Economic challenges are largely attributed to external shocks and the insufficient execution capabilities of local governments. A growth rate of 4.7% is already in line with potential growth, the costs of deleveraging are manageable, and there is no need for aggressive stimulus measures. This effectively shuts down the possibility of significant fiscal expansion in the latter half of the year at the policy level, and the new normal for people's livelihoods is that Chinese citizens can survive on minimal resources for up to three years.
Zhong Caiwen's four consecutive articles convey a clear message: the focus is not on 'resilience and vitality', but on the official acceptance of the current growth rate and a definitive rejection of aggressive stimulus measures. To date, Xi Jinping has not publicly acknowledged the systematic failures and institutional weaknesses in economic policy, instead opting to shift the blame downwards. This blame-shifting approach is, in itself, part of the problem. Unless the fundamental contradictions between income and expectations are addressed, and structural and institutional issues are confronted, the zombie economy will not be revived by a few signed articles; it will only continue to decline further.
(First published by People News) △
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