In an increasingly complex geopolitical landscape, the challenges faced by Chinese President Xi Jinping are multifaceted, with President Donald Trump’s trade policies featuring prominently. However, it’s crucial to understand that Xi’s real test extends beyond Trump’s trade war; it is the critical conditions within China’s own economy that pose substantial hurdles to his vision for a rejuvenated nation. As Xi navigates a landscape marked by domestic economic struggles, he must reckon with the consequences of long-standing issues that have compounded over time.
Economically, China presents a paradox with its vast population of 1.4 billion, suggesting a rich domestic market. However, the reality is that consumer confidence is wavering, largely because of pervasive concerns about an uncertain economic future. This uncertainty has not emerged solely from the trade tensions with the United States; it is deeply rooted in the collapse of the housing market, which has eroded the financial security of many Chinese families who once poured their life savings into real estate. As housing prices continue to fall, consumer expenditure has diminished, contributing to a sluggish economy.
The ramifications of this housing crisis are monumental. Reports indicate that the housing market is peppered with ghost cities—areas filled with empty apartments due to over-construction during a booming economic period that has since soured. The previously unchecked development led to surpluses of housing units that the current market alone could not absorb. Data presented by He Keng, a former deputy head of the Statistics Bureau, illustrates this dire situation, estimating that vacant homes could accommodate three billion people—an unrealistic statistic considering the total population of China is approximately 1.4 billion.
Moreover, the economic conditions are not merely about empty apartments; they extend to the broader anxieties surrounding job security. A significant portion of the young population—ranging from recent graduates to those in their early careers—faces profound challenges in finding stable employment. The youth unemployment rate for urban areas reached alarmingly high levels, surpassing 20%. This stagnant job market, combined with fears surrounding an inadequately funded pension system for an ageing population, adds further layers of concern for Xi’s leadership.
Recognizably, Xi Jinping’s rise to power in 2012 was accompanied by ambitious economic promises that have yet to materialize successfully. His assertion that “only when the country does well can every person do well” encapsulated a vision that now feels increasingly elusive given the current economic stagnation. Nevertheless, Xi remains hopeful, viewing these obstacles not only as challenges but also as opportunities for transformation and growth within China.
While Trump’s tariffs may appear to be a significant external pressure, they are merely exacerbating existing strains within China’s economy. Xi’s government has sought to pivot through policies aimed at stimulating domestic growth, emphasizing the need for increased consumer demand to counter prevalent economic weakness. Initiatives like childcare subsidies, wage increases, and discounts on key items have been put in place to spur spending. Nevertheless, experts argue that these short-term measures are insufficient without a long-term strategy aimed at enhancing disposable income across the population.
From a political viewpoint, Xi is also contending with a disillusioned younger generation whose frustrations could ignite unrest. Recent reports indicate a surge in protests linked to financial grievances, despite the government’s tight grip on social media and public discourse. Even though these protests are quickly suppressed, they signal that the Communist Party is grappling with discontent, which could pose a significant risk to Xi’s hold on power.
In terms of international relations, Xi is pivoting to capitalize on opportunities presented by the changing global economic landscape. With Trump’s administration frequently applying pressure on trade, China has begun to explore new markets, notably expanding its presence across Southeast Asia, Latin America, and Africa. The Belt and Road Initiative stands as a pivotal component in reinforcing these ties, showcasing China’s strategic efforts to position itself as a reliable trade partner while sidestepping potential pitfalls from US tariffs.
The overarching reality remains that China cannot effortlessly transition its economic model from an export-driven to a consumption-driven economy overnight. The challenges presented by both domestic issues and international trade tensions will undoubtedly shape the trajectory of Xi’s leadership. As he seeks to transform adversity into opportunity, Xi’s true test lies within China’s economy, demanding both pragmatism and innovation in response to profound internal pressures. This complex interplay of factors will ultimately determine whether Xi can realize his dream of a more prominent and self-reliant China amidst global uncertainties and competition.