Currently, major ports such as Shanghai, Ningbo, and Guangdong are filled with empty shipping containers, indicating poor performance in China&9;s export trade. (Video screenshot)
People News – To boost the economy, the Chinese Communist Party (CCP) launched a series of stimulus policies, both to address existing issues and introduce new measures, in the second half of this year. It is highly likely that further signals of monetary and fiscal expansion will be announced at the upcoming Central Economic Work Conference. However, these measures will not fundamentally reform the economic structure. This suggests that the CCP's economy will continue its downward spiral through a series of ineffective stimuli. At the beginning of next year, the Trump-era tariffs could become a heavy blow that marks the end of the CCP's economic growth trajectory. Recently, following in the footsteps of two prominent system-insider economists, Fu Peng and Gao Shanwen, former central bank governor Yi Gang and Tsinghua University economist Li Daokui have also voiced their criticisms of China's economy and the CCP's economic policies, attracting widespread attention.
A Package of Stimulus Policies Turns Into Blanks: All Sound, No Substance
On December 4, Xinhua News Agency published an article addressing China's economic issues, stating that success should not be judged solely by GDP. The piece claimed that "a GDP growth rate of around 5%, whether slightly above or below, is acceptable."
This statement reflects the CCP and Xi Jinping preemptively conceding defeat and contradicting their own narrative. The state media's open acknowledgment of the economic downturn signals that Zhongnanhai is truly at the end of its rope, devoid of solutions to combat economic decline. The next step might as well be declaring that success will no longer be judged by GDP, but by fines collected instead.
Since September, the CCP has introduced a series of so-called heavy-hitting policies and large-scale stimulus measures: interest rate cuts, lowering mortgage rates on existing loans, reducing tax and fee burdens, planning the launch of stabilization funds, issuing special treasury bonds, local state-owned enterprises stepping in to acquire housing inventory, and a 12 trillion yuan fiscal expansion to refinance local government debt. But what have been the results?
The housing market, a key indicator of economic revitalization, tells the story. While the primary and secondary housing markets in first- and second-tier cities saw a slight uptick in transaction volumes in October, prices remained uncertain. By November, both transaction volumes and prices in the housing market had declined. As for the much-touted October manufacturing PMI of 50.1%, which edged just above the expansion threshold, a closer look reveals troubling details: employment in the sector has decreased, companies are continuing layoffs, and unemployment is rising. Can this be called economic prosperity? On the other hand, foreign trade has been frantically rushing to fulfill orders before the Trump-era tariffs return upon his inauguration, leading to a temporary increase in new orders. However, this short-term rebound cannot alter the underlying economic stagnation.
As per tradition, the CCP will hold the Central Economic Work Conference on December 11-12 to review this year’s economic performance. Typically, this involves self-congratulatory messaging and the release of broad macroeconomic policy signals for the following year. State media and online platforms will work together to amplify sentimental narratives pointing toward economic revival, spreading rumors that the central government is preparing major initiatives. The ultimate aim is to deceive the public into spending: buying houses, stocks, new energy vehicles, home appliances, and government bonds. These are the only tricks left in the CCP’s playbook. However, whether people have money or not, or whether they are unemployed, seems irrelevant to the authorities. The relentless push to lower bank deposit interest rates and force citizens to withdraw and spend their savings is effectively akin to a financial scam. Ordinary people are left with no choice but to treat it as such.
Morgan Stanley Subtly Criticizes Beijing
Even Morgan Stanley, typically aligned with Beijing and known for walking a fine line to avoid conflict, has voiced restrained criticism of Zhongnanhai. Xing Ziqiang, Managing Director for China at Morgan Stanley, remarked that reigniting China’s economy requires a "three-step process." So far, the shift in monetary policy in September represents only the first step. The more critical second and third steps involve stronger fiscal policies to boost consumption and structural reforms to restore private entrepreneurs' confidence. Xing emphasized that he hopes the December Central Economic Work Conference will break tradition and explicitly detail concrete policies, offering tangible financial measures.
Morgan Stanley’s message is clear: Beijing cannot rely on the thunder it drums up without delivering the rain—it’s as if the bank is being sold out. Prior to the CCP's announcement of a 12 trillion yuan fiscal refinancing plan for local debt on November 8, Morgan Stanley had been enthusiastically projecting that China would take aggressive measures to stimulate real estate and household consumption. Instead, Beijing’s policy was narrowly focused on bailing out local debt, causing an uproar in the market.
As for Morgan Stanley’s proposed third step—so-called structural economic reforms—this is essentially wishful thinking, akin to negotiating with a tiger for its prey. The second step, supporting consumption, also appears overly optimistic. Recently, Fu Peng, in an internal speech at HSBC, pointed out that China currently suffers from insufficient effective demand and the collapse of the middle class. He argued that the root of both political and economic issues lies in ideology.
All communist states, including the former Soviet Union, have faced problems with insufficient domestic demand in their economic systems. Back in the day, Eastern Europe and the Soviet Union lagged far behind global standards in terms of GDP per capita. Household income as a percentage of GDP in communist countries is typically 20-30% lower than in Western capitalist economies. This systemic issue is fundamentally dictated by the communist framework: the Communist Party exists to compete with the people for resources and seeks to abolish private ownership.
Following China’s economic reforms, the CCP fostered a significant degree of cronyism. Many private-sector giants are essentially proxies for the families of senior CCP officials. Enterprises like Poly, CITIC, and Evergrande leveraged market-driven resource allocation, foreign investment advantages, and capital operation techniques to serve political power and enrich the elite. Their primary motivation was profit-seeking for power rather than ideological purity. However, under Xi Jinping’s leadership, these crony capitalist proxies have faced direct crackdowns. Xi has aggressively expanded the influence of state-owned enterprises (SOEs), as they represent the CCP’s economic lifeline and foundation. Economists widely recognize, however, that SOEs are akin to cancerous cells in the macroeconomy. Public ownership essentially enables the legalized plundering of national wealth. Supported by the state, SOEs engage in unfair competition with private enterprises, which has destroyed numerous private firms and left young people unable to find jobs.
Zhongnanhai Runs Out of Options as Economists Challenge the Regime
In a recent speech, Gao Shanwen noted that between 2021 and 2024, China's urban areas lost 47 million workers. This was a result of the economic downturn caused by the pandemic and CCP policies that ran counter to economic logic, failing to create enough jobs. The ripple effects have led to declining real estate consumption, with many rural migrants returning to their hometowns. People are now reluctant to buy, renovate homes, or spend, while young people cut back on expenses, resorting to frugal living.
The CCP’s remaining policy tools include further interest rate cuts, increasing the fiscal deficit, expanding the scale of special bond issuance, issuing ultra-long-term treasury bonds, supporting trade-ins for old products, and increasing transfer payments to local governments. State media reported that by the end of 2023, China’s total government debt stood at 85 trillion yuan, including 30 trillion yuan in national debt, 40.7 trillion yuan in local government statutory debt, and 14.3 trillion yuan in hidden debt. They claimed the government debt ratio was 67.5%, significantly lower than the G7 average of 123.4%. However, this is self-deception. According to Gao Shanwen’s calculations, China’s GDP growth has been overstated by 3 percentage points annually since 2020, with a cumulative overstatement of 10 percentage points. If these inflated figures are subtracted, the real GDP is around 100 trillion yuan, while the actual debt exceeds 130 trillion yuan, making the government debt ratio approximately 130%, far exceeding the 60% warning threshold.
Adding to the challenges, the return of Trump-era tariffs will exacerbate the situation. According to Caixin, on December 4, former central bank governor Yi Gang, speaking at the 20th Tokyo-Beijing Forum in Japan, suggested that the optimal economic response to Trump’s "small yard, high fence" tariffs would be not to retaliate. However, he acknowledged that from a political perspective, non-retaliation might not appease domestic public opinion, potentially forcing policymakers to take economically irrational actions.
This is a case of reaping what you sow. The CCP’s deliberate stoking of nationalist sentiment for political stability may ultimately backfire. The U.S.-China trade relationship is inherently unbalanced, with China enjoying a trade surplus with the U.S., leaving little room for effective retaliation. After joining the WTO, the CCP enjoyed preferential treatment, engaged in intellectual property theft, and forced technology transfers. Now, as it faces repercussions, any counterattack only risks inviting a harsher response. Yi Gang, aware of these realities, highlighted the severity of the situation, yet his comments—like those of Fu Peng and Gao Shanwen—were censored domestically.
The times are indeed pressing, with even regime-aligned experts finding themselves in dissent. On December 2, Tsinghua University economics professor Li Daokui shared insights from a recent trip to Vietnam, sparking widespread attention among Chinese and international netizens.
Li described Vietnam as pursuing a "wealthy citizens, poor government" model. According to him, Vietnamese citizens lead relaxed and elegant lives, spending freely without worrying about saving. Average monthly wages are 3,000–3,500 yuan, equivalent to the salary of a deputy director-level Chinese official. College graduates working in factories earn 5,000–6,000 yuan, comparable to a department-level official’s salary, while mid- to senior-level managers earn salaries on par with national leaders. Vietnamese citizens are unbothered by housing prices; Hanoi’s most expensive properties cost 20,000 yuan per square meter. Under new land laws, both urban and rural residents, as well as overseas Vietnamese, can purchase land and build homes without restrictions—akin to China’s “small property rights” homes. Vietnam also boasts widespread healthcare access. Women, whether working in agriculture or factories, are willing to join the workforce and have children. In Vietnam, men woo women with flowers and coffee, not by buying cars. Li noted that the government is relatively poor and focuses on job creation. It often refrains from taxing businesses for years, ensuring citizens find employment and start consuming, at which point it collects taxes on consumption. Urban infrastructure is notably underdeveloped.
Netizens who watched Li’s video were stunned, and I found myself equally shocked. It’s no wonder that during Xi Jinping’s visit to Vietnam last year, former Vietnamese Communist Party General Secretary Nguyen Phu Trong offered only a perfunctory toast. The Vietnamese leadership knows the CCP lacks public support. Similarly, in October this year, Vietnam’s top political and military leaders warmly welcomed Zhang Youxia, recognizing that the CCP’s continued mismanagement may eventually lead to its collapse.
(Originally published in People News)
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