Since the Chinese Communist Party (CCP) abruptly abandoned its nearly three-year-long "zero-COVID" policy, China’s economic growth has struggled under the negative impact of that policy and other measures that are promoted as boosting the economy but, in reality, hinder it. Recently, the authorities have been promoting major initiatives to spur economic growth. In response, China's long-declining stock market has experienced erratic fluctuations, and export growth in September saw a sharp decline. Experts suggest that the CCP's proposed policies for boosting economic growth are examples of "economic madness."

Background of China's Current Economic Struggles

According to Voice of America, the "zero-COVID" policy, which disrupted normal economic activities and daily life, was once touted by the CCP as an unprecedented and successful anti-epidemic measure in human history, showcasing the superiority of China’s system and governance. However, this policy, which Chinese leader Xi Jinping claimed to have personally directed and overseen, clearly ended in failure. The CCP has refused to release the death toll from the pandemic in China, even classifying previously standard annual death figures as state secrets.

Meanwhile, many experts both inside and outside China (as well as millions of Chinese citizens who have experienced it firsthand) have noted that the "zero-COVID" policy, which ultimately proved ineffective in curbing the virus, continues to negatively impact China's economy even after it was abruptly ended. Many experts also argue that China’s sluggish economic performance in recent years has been caused by multiple factors, including a series of economic growth measures introduced by Xi Jinping's administration, which have actually harmed the economy. The "zero-COVID" policy was just one of these contributing factors.

In the aftermath of the pandemic, China's economic growth has remained weak, with the threat of deflation looming, the real estate market continuing to decline, and consumers either unwilling or unable to spend. This has created a vicious cycle in the economy. Despite calls from numerous domestic and international economic experts for direct financial aid to citizens to quickly stimulate domestic demand and economic growth, the CCP in September introduced a series of measures aimed at stimulating the stock and real estate markets. These measures caused a sharp rise in the stock market before China’s National Day on October 1, but after the "Golden Week" holiday, the market experienced sharp declines and fluctuations, leaving tens of thousands of individual Chinese investors trapped and frustrated.

Propaganda Efforts Fail to Yield Results

Despite the CCP deploying the National Development and Reform Commission, known as the "Little State Council," along with the leadership of the Ministry of Finance to hold a rare press conference for domestic and foreign journalists in an attempt to restore investor and public confidence in China's stock market and economic prospects, the subsequent volatility in the stock market suggests that these propaganda efforts have had little effect.

On Tuesday, October 15, the Hong Kong-based South China Morning Post reported, "(Hong Kong's main stock market index) the Hang Seng Index closed down 3.7% at 20,318.79 points, marking the second consecutive day of decline. The Hang Seng Tech Index dropped 4.7%. (China’s main stock market indices) the CSI 300 Index fell 2.7%, while the Shanghai Composite Index dropped 2.5%."

Just a day earlier, the Financial Times reported:

"On Monday, China's stock market rose after Beijing sought to reassure investors over the weekend with plans to increase spending in order to boost the world's second-largest economy.

"The Ministry of Finance stated on Saturday that, as part of its stimulus plan, it intends to recapitalize local governments and state-owned banks and purchase unsold real estate, though no specific figures were provided.

"Chinese investors initiated a record stock market rebound following Beijing's announcement of monetary stimulus measures in late September, and they are now waiting for the government to disclose its planned fiscal spending."

One opportunity for the Chinese government to make such an announcement could be later this month, when China's nominal top legislative body, the Standing Committee of the National People's Congress, convenes. It may approve increased government borrowing and the issuance of special government bonds to support the economy.

China's Economic Growth Rate Expected to Fall Below 5% This Year

China's once high-speed economic growth has shown a trend of declining growth rates over the past decade, making the goal of maintaining a "5% growth rate" a key policy objective for the Chinese government in recent years. However, on October 15, Reuters published a report titled Reuters Poll Shows China's Economy to Grow by 4.8% in 2024, Falling Short of the 5% Target, which stated:

"A Reuters poll showed that China's economy could grow by 4.8% in 2024, below the government's target, and growth in 2025 could further decline to 4.5%, adding sustained pressure on policymakers to consider additional stimulus measures.

"According to the poll, conducted from September 27 to October 15, the gross domestic product (GDP) in the third quarter is expected to grow by 4.5% year-on-year, down from 4.7% in the second quarter, marking the lowest level since the first quarter of 2023."

For many countries around the world today, an economic growth rate of over 4% would be great news. However, due to China's unique situation—particularly the wealth disparity under its system of socialism with Chinese characteristics—a growth rate below 5% could mean widespread business bankruptcies, massive unemployment, and a significant increase in the proportion of people facing basic living difficulties.

China's Economic Growth Faces Headwinds

Over the past few decades, the Chinese Communist Party (CCP) has repeatedly relied on expanding exports to boost economic growth. However, this strategy is now facing significant challenges.

On October 14, the Associated Press reported: "China's exports slowed sharply in September due to weakening global demand, heightening concerns about how to revive growth in the world's second-largest economy."

"The CCP’s General Administration of Customs reported on Monday that exports rose 2.4% year-over-year in dollar terms last month, down from 8.7% year-over-year growth in August. Imports in September grew by only 0.3%."

"Economists had expected exports to grow by about 6% and imports to increase by around 0.9%. China's trade surplus in September was $81.7 billion, down from $91 billion in August."

"Since the end of the COVID-19 pandemic, CCP leaders have been struggling to boost the economy."

"The outlook for trade as a driver of economic growth has dimmed, especially with the United States and Europe recently increasing tariffs on Chinese exports of electric vehicles and other products. Weak import growth reflects sluggish domestic demand, partly due to the prolonged downturn in the real estate sector, which is a key driver of sales across various product categories."

Canton Fair Reflects Uncertain Economic Prospects for China

The CCP’s strategy of expanding foreign trade as a path to economic growth is encountering obstacles, and signs of this are becoming apparent in various areas. On October 15, Japan’s NHK public radio and television website published a report titled China’s Major International Trade Fair Opens in Guangzhou Amid Stagnant Domestic Demand, stating:

"A major international trade fair selling Chinese products to foreign companies has opened in Guangdong Province, China. With domestic demand in China continuing to stagnate, attention is focused on whether this will lead to an increase in exports.

"The Canton Fair, which opened on the 15th in Guangzhou, Guangdong Province, southern China, is a large international trade exhibition showcasing Chinese products such as home appliances, machinery, and vehicles to foreign businesses. According to the organizers, over 130,000 foreign buyers attended this year...

"As of last month, China's exports have been growing for six consecutive months compared to the same period last year, but there is uncertainty about the future due to the imposition of tariffs on Chinese products such as electric vehicles by the U.S. and Europe...

"In China, domestic demand has continued to stagnate due to the prolonged slump in the real estate sector. As a result, exports are expected to become a key driver of economic growth, and whether this trade fair can stimulate export growth is a subject of close attention."

Plan to Boost Economic Growth: A "Typical Economic Madness"

Since the end of the "zero-COVID" policy, China's economy has continued to struggle, deteriorating steadily. Numerous experts, both inside and outside China, have called on the Chinese Communist Party (CCP) to take decisive and bold measures to revive the economy. However, the measures implemented so far have been criticized by experts and the Chinese public as inadequate.

Meanwhile, George Magnus, a scholar at the University of Oxford who has long studied China's economy and politics and the author of Red Flags: Why Xi’s China is in Jeopardy, published a commentary in The Guardian on October 13. The article, titled China’s Plan to Boost Weak Growth is Typical Economic Madness, was subtitled: "For the fourth time in 16 years, the CCP has launched a 'bazooka-style' stimulus plan to revive the economy, but China's problems need structural solutions."

Magnus wrote, "The CCP leaders seem to be invoking Einstein's definition of insanity: doing the same thing over and over again and expecting different results. (Though there is no verifiable evidence this definition comes from Einstein.)"

"For 16 years, Beijing has panicked over slowing economic growth and introduced a series of economic stimulus measures aimed at rebooting the economy. These measures failed in 2008, 2015, and 2021, and the recently announced 'bazooka-style' measures are also likely to fail."

"These plans failed in the past because the government mainly focused on cyclical or short-term prospects. The government seems to think that quick relief measures are the solution to systemic problems such as high youth unemployment, the bursting of the real estate bubble, low productivity, and deflation. However, China's issues require structural or fundamental economic reforms, which would entail political change—an unimaginable prospect for its Leninist government."

"The solutions would involve the sustainable expansion of income and consumer demand in the economy, eliminating the risks of deflation, further redistributing income, promoting the development of private enterprises, and extensive tax and local government reforms."

"Xi Jinping's Leninist agenda emphasizes supply and production, as well as what he calls 'high-quality development,' which is essentially about state- and party-led industrial policies that allocate capital to lead and dominate the global system in modern science, technology, and innovation."

"Without a doubt, China already possesses and aims to expand advanced industrial expertise and leadership in some key enterprises and sectors. However, these islands of technological dominance exist in a sea of macroeconomic imbalances and struggles, which can only truly be addressed through freer and more open economic reforms."

"The current focus on economic policy is not just about a few percentage points of GDP but whether the CCP government can—or is willing to—rise to the challenge."