In 2024, the Chinese Communist Party (CCP) has issued at least 20 trillion RMB in currency, with most of it going towards supporting local governments and state-owned enterprises, rather than boosting consumer spending. The CCP has stated that boosting consumption will be a top priority next year, but experts believe that the CCP will not rescue the people, leading to an abnormally distorted Chinese economy in the coming year.
A recent CCP Central Economic Work Conference declared “boosting consumption” and “expanding domestic demand” as the top priorities for 2025. Previously, the three main drivers of China’s economic growth – investment decline, export slowdown – are no longer effective, forcing the CCP to focus on expanding sluggish domestic demand as a primary means to stimulate the economy.
The United States, as the world’s largest economy, has domestic consumption contributing 67.90% to GDP; Japan’s domestic consumption contributes 55.58% to GDP. In comparison, China’s domestic consumption accounts for only 39.00% of its GDP.
Over the past decade, China’s contribution of consumption to GDP has shown a slow growth from 35.83% in 2013. However, when viewed over a longer period, it has been on a downward trend. In 1962, consumption accounted for 72.16% of GDP (similar to present-day America), but has steadily declined since then, only beginning to recover in 2010, yet still remaining below the 2005 level of 39.59%.
According to data released by the National Bureau of Statistics of China on December 9th, China’s Consumer Price Index (CPI) in November only increased by 0.2% year-on-year, marking a continuous four-month decline (0.6% in August, 0.4% in September, 0.3% in October).
In November, the month-on-month CPI fell by 0.6%, marking a fifth consecutive month of decline (0.5% in July, 0.4% in August, 0.0% in September, -0.3% in October).
These data indicate that the Chinese economy remains weak, with weak domestic demand and lingering insufficient consumption. On December 20th, Liu Tao, deputy director of the Market Economy Research Institute of the Development Research Center of the State Council, stated that China faces insufficient total demand, especially in terms of consumption demand, and that boosting consumption is the primary task for the coming year.
Data released by the People’s Bank of China on December 13th showed that by the end of November, the broad money supply (M2) balance was 311.96 trillion RMB, a 7.1% increase year-on-year; the narrow money supply (M1) balance was 65.09 trillion RMB, a 3.7% decrease year-on-year; the currency in circulation (M0) balance was 12.42 trillion RMB, a 12.7% increase year-on-year.
Although M2 grew by 7.1% year-on-year, which was lower than the expected 7.5%, indicating a cautious attitude towards credit issuance; M1 decreased by 3.7% year-on-year, suggesting tight liquidity for enterprises, especially for small and medium-sized enterprises facing severe challenges in financing, thereby affecting market activity. The relative growth of M0 indicates strong demand for cash from consumers. However, the market has not felt a strong demand impact.
In January 2023, China’s M2 balance was 274 trillion RMB, which increased to 298 trillion RMB in January 2024, and now further rose to 311 trillion RMB. Comparing year-on-year, in December 2023, the M2 balance was 292 trillion RMB, with an increase of almost 20 trillion RMB in less than a year, comparable to printing nearly 20 trillion RMB in just under a year.
The latest data from the People’s Bank of China shows that in the first 11 months of 2024, renminbi deposits increased by 19.39 trillion RMB, roughly the same as the amount of currency printed. People and companies have been focusing on deposits, seen as a means to preserve and hedge their assets.
Despite the massive printing of currency, it has failed to stimulate consumption in recent years. From 2021 to 2023, the CCP issued around 54 trillion RMB, but the large-scale currency printing has not had any positive impact on the Chinese economy and people’s livelihoods, as most of the funds did not reach consumers.
The exact amount of currency issued by the CCP in 2024 is still unknown, but financial commentator Zhai Shanying mentioned in a recent media program that at least 20 trillion RMB in national and local debts were issued this year. He interpreted the CCP Political Bureau meeting that set the tone for this year’s CCP Central Economic Work Conference as “printing more money, borrowing more, and spreading more lies.” He mentioned that the Chinese economy has reached a dead end.
Currently, the Chinese economy faces dual pressures from both international and domestic fronts. China’s goods have been subject to global sanctions due to cheap exports, and the shrinkage in export profits has led to a decline in overall economic performance. At home, long-standing issues with the real estate industry, local debts, and more have erupted, leading to a downturn in the economy, a wave of business closures, and a surge in unemployment.
The economic downturn has resulted in decreased incomes for the people, which is believed to be a significant factor contributing to the prolonged lackluster domestic consumption in China.
In November, the CCP’s Ministry of Finance launched a 10 trillion RMB debt-for-bond plan to rescue local governments and stimulate demand. However, this 10 trillion RMB plan simply swaps high-interest, opaque local debts for low-interest, transparent government bonds, rather than directly injecting the economy or boosting consumer spending.
In recent years, despite various stimulus policies implemented by the CCP to boost economic growth, China’s economy has failed to recover. This outcome proves that the CCP has not focused on boosting consumption by increasing residents’ income, but rather by supporting local governments and state-owned enterprises, with little success. Even some within the CCP system have voiced objections to this approach.
Zhou Tianyong, a professor at the CCP Party School, believes that only by increasing residents’ incomes can consumption capacity be enhanced, as China’s GDP structure is severely imbalanced between income, consumption, and GDP. In general, in most countries, the proportion of residents’ income and consumption to GDP is between 60% and 70%, while in China in 2023, the proportion was between 45% and 37%, with residents’ own consumption expenditure only accounting for 30% of GDP.
He stated that inadequate consumer purchasing power leads to a weakening in consumption, resulting in overcapacity in manufacturing, overstock of production materials, contraction in industries like food services, shopping, logistics, declining investments, industries shifts, and capital outflows.
To address these issues, he suggested abandoning the long-standing model of government and state-owned enterprise investment-driven growth and instead focusing on increasing residents’ incomes to drive consumption. Specifically, he proposed directly injecting liquidity into residents’ pockets by using central government bonds to stimulate consumption, prioritizing low and middle-income residents nationwide, benefiting them. This plan could account for 25% of the total central government bonds in that year, equivalent to 1.5 trillion RMB, and be implemented continuously over three years.
Li Hengqing, an economist at the American Institute for Information and Strategic Studies, pointed out that while Western countries clearly distribute money directly to ordinary citizens to stimulate economic growth and consumption, the CCP does not prioritize such measures for the people, instead focusing on rescuing local governments first.
Zhai Shanying emphasized that the CCP’s survival in 2024 heavily relies on borrowing money. The biggest problem the CCP faces is having borrowed too much. As a result, they have spent future money that China will need for the next 200 years, with debts of at least 200 trillion RMB, essentially bankrupting China. This has initiated a lengthy debt repayment period, turning the national debt into individual debts for the Chinese people through various illicit means of seizing money from businesses and the public.
In his remarks on December 22nd, he forecasted that in 2025, China’s economy would be in a state of extreme abnormality, stuck in a vicious cycle of debt, with the CCP engaged in rampant deception, local authorities breaking free from central control, industries imploding, and a large number of business closures. The core theme of China’s economy in the coming year will be: borrowing money, confiscating assets, deceiving, imploding, and closures.