On April 30, the Chinese Communist Party (CCP) Politburo held a meeting to discuss the economy. While it only mentioned achieving a “good start,” it listed a series of challenges including “insufficient demand,” “significant pressures on business operations,” “multiple risks and hidden dangers,” “not smooth enough internal circulation,” and “increased complexity, severity, and uncertainty of the external environment.” The CCP Politburo also painted a bleak picture of the economy and seemed to be at a loss. The meeting decided to convene the Third Plenary Session in July but the underlying risks still exist.
The Chinese economy is deteriorating, yet the CCP prohibits any negative comments and insists on singing the praises of the economy. At the behest of senior CCP officials, the National Bureau of Statistics of China fabricated false GDP growth rate of 5.3% for the first quarter, lacking substantial support from various basic data easily debunked by outsiders.
If China’s economy had truly grown by 5.3% in the first quarter, the Politburo meeting could have been termed a “great success”. However, the Politburo members knew the statistics were fake, only reluctantly stating that the economy achieved a “good start” with “increased positive factors in the economic recovery trend.”
The Politburo meeting’s lukewarm evaluation punctured the data fabricated by the NBS.
A year ago, on April 28, 2023, the CCP Politburo also discussed the economy, announcing a 4.5% year-on-year growth rate for the first quarter; however, that meeting claimed the growth was “mainly restorative” and that the economy showed signs of a positive turnaround, achieving a “good start” in economic performance.
A year later, with higher fabricated numbers by the NBS, the Politburo’s evaluation still remains a “good start,” revealing the real situation of the Chinese economy.
The Politburo meeting vaguely claimed the economy was “improving”, but lacked specific support; instead, admitting that the “continuous improvement of the economy still faces many challenges, mainly due to insufficient effective demand, significant pressures on business operations, a high level of risk in key areas, a not smooth internal circulation, and a noticeable increase in the complexity, severity, and uncertainty of the external environment.”
Insufficient demand mainly stems from high unemployment rates and low incomes among the general population; if businesses only focus on limited domestic markets, survival would be difficult, and the so-called “internal circulation” cannot be realized. The CCP is once again reliant on foreign markets, but the external environment is worsening, with Western countries jointly accusing China of overcapacity and dumping.
With no clear way out internally or externally, the Politburo has no solutions, only reiterating the need to “strengthen confidence in economic work.” However, the rhetoric of the Politburo meetings is only making officials more distrustful.
The repeated measures discussed in the Politburo meetings lack specificity and focus, not only failing to solve problems but also exposing more truths.
The meeting stated, “early issuance and effective use of super-long-term special national bonds, accelerating the progress of issuing and using special bonds”; ensuring that high-risk debt provinces and cities “truly reduce debt pressure.”
Excessive local government debt has always been a major hidden risk, and the CCP can only use new long-term bonds to cover old ones, postponing the problem. The CCP’s top leadership desperately struggling to maintain its power only plants an even bigger time bomb, which is essentially a self-destructive act.
The Politburo meeting once again mentioned “large-scale equipment upgrades and trade-ins for consumer goods” to “expand domestic demand.”
“Large-scale equipment upgrades” mainly refer to enterprises, including “developing new quality productivity… nurturing and growing emerging industries… transforming and upgrading traditional industries,” among others. State-owned enterprises are eagerly awaiting a new round of central investment, which also presents another opportunity for corruption; however, the actual amount of money that the CCP can allocate has not been seen as of now; regardless of the sum, it would entail more debts, which is not a solution to expanding demand, but rather another economic campaign. This move is bound to lead to more waste, inefficient investment, and further increase in business capacity.
Private enterprises cannot receive investments from the CCP, lack funds for equipment upgrades, and have no desire to upgrade equipment. The CCP’s new economic movement completely contradicts market principles, bringing about new negative consequences.
The CCP is promoting the trade-in of consumer goods for new ones, but the public is not buying into it. As people’s consumption continues to downgrade, they would certainly not discard durable goods that are still in good condition to buy new ones. Consequently, the CCP is now targeting rural areas, with the Politburo meeting stating that it aims to promote “new urbanization to continuously release consumption and investment potential.”
The bursting of the Chinese real estate bubble is imminent, and with no clear way out, the Politburo can only continue to claim to “ensure housing construction and delivery, coordinate and research policy measures for digesting existing properties and optimizing new housing.”
Whether the CCP discusses the economy seems to be irrelevant, as the CCP’s economic mistakes at the moment seem irreparable.
The Politburo meeting specifically reviewed the “Opinions on Continuing to Deepen the High-Quality Development of the Yangtze River Delta,” which the core leader Xi Jinping referred to as a “significant strategic decision” made by the Party Central Committee led by Xi. However, the meeting made no mention of the Western Development.
From April 22 to 23, Xi Jinping had just made a brief inspection tour in Chongqing and chaired a forum on the Western Development. At that time, Xi Jinping stated that the western region is “very important”; however, a week later, the Politburo meeting made no mention of it.
Not only was the Western Development not included in the economic agenda, but Xi Jinping’s regional economic plans such as the “Coordinated Development of Beijing-Tianjin-Hebei,” Xiong’an New Area, Yangtze River Economic Belt in 2023, and the rise of the central region proposed in 2024 were not mentioned in the Politburo meeting.
Less than a year ago, from May 10 to 12, 2023, Xi Jinping conducted inspections in Xiong’an, Hebei, and other places and chaired a forum on “Promoting the Coordinated Development of Beijing-Tianjin-Hebei.”
On October 12, 2023, Xi Jinping chaired the forum on the development of the Yangtze River Economic Belt in Nanchang, Jiangxi.
On November 30, 2023, Xi Jinping hosted a forum to promote the integrated development of the Yangtze River Delta in Shanghai.
On March 20, 2024, Xi Jinping chaired a forum to promote the rise of the central region in Changsha, Hunan. At that time, Xi Jinping also referred to the central region as “very important.” Li Qiang attended these forums repeatedly, expressing agreement with Xi Jinping.
This series of paper-based plans for regional economic development goes against the laws of economic growth and are more of political propaganda, which is unlikely to make any substantial progress and is often left unattended after the slogans are announced. The opinions on deepening the integration of the Yangtze River Delta adopted at the Politburo meeting can be seen as an attempt to implement Xi Jinping’s speech on November 30, 2023, with a delay of 5 months; it would be difficult for the specific coordinating officials to carry out.
The Politburo meeting stated that the development of the Yangtze River Delta should “pave the way.”
The economy of the Yangtze River Delta region is better than other areas, making it more conducive to promoting integrated development. If the integration of the Yangtze River Delta proves challenging, implementing economic plans in other regions would be even more difficult. Despite five months of coordination on the Yangtze River Delta, it can only be said to be “paving the way” for now, without concrete progress.
The meeting further stressed that the “Central Leading Group for Regional Coordination Development needs to strengthen overall coordination… Shanghai needs to better play a leading role, and Jiangsu, Zhejiang, and Anhui should leverage their respective strengths.”
It seems that the central leadership’s regional coordination group cannot coordinate Shanghai or the three provinces effectively, hence submitting belated proposals to the Politburo, which are ineffective, leaving them with only the option to “pave the way.” Other regional economic plans such as Jing-Jin-Ji, Xiong’an New Area, Yangtze River Economic Belt, the rise of the central region, and the Western Development must wait.
The Politburo decided to convene the Third Plenary Session in Beijing in July, putting an end to various rumors circulating, but the associated risks haven’t been eliminated and may even increase.
The Third Plenary Session is expected to remove a series of central committee members who have fallen from grace, including Qin Gang, Li Shangfu, and several disgraced military generals, which would certainly be embarrassing for Xi Jinping. These individuals were personally handpicked and promoted by Xi Jinping at the 20th CCP Congress in October 2022, but less than a year later, they have all disappeared, leaving Xi Jinping in a precarious position. Reporting on this at the full assembly would be a challenge. Corruption is likely to be the main excuse for handling these officials, but despite a decade of anti-corruption efforts, corruption has only worsened, making it difficult to shift blame elsewhere. Xi Jinping’s authority is bound to be questioned.
The delayed convening of the Third Plenary Session may also reveal underlying power struggles. The Politburo meeting stated that the Third Plenary Session would “focus on further comprehensive deepening of reforms and advancing China’s modernization.”
“Comprehensive deepening of reforms” and “China’s modernization” are two completely opposing directions. The former entails continuing reforms, delegating power, and further opening up to align with the world, while the latter, China’s modernization, signifies self-reliance and marks the “internal circulation” of the economy, which essentially implies halting reforms and reverting to a planned economy, consolidating power, and actively disengaging from the world. These two approaches are contradictory.
Moreover, the meeting reiterated the importance of Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the “Three Represents,” and the Scientific Outlook on Development, hinting at not denying the contributions of former leaders. However, it also called for enforcing Xi Jinping’s “series of new thoughts, viewpoints, and judgments” on deepening reforms. This presents a dilemma for officials, as it would be challenging to derive a true reform and opening-up path from “Xi Jinping Thought,” making it increasingly difficult to display loyalty. With the Third Plenary Session approaching, high-ranking CCP officials will have to engage in a new political drama.
Selecting July for the Third Plenary Session also poses another potential risk. July is the peak season for floods, during which CCP officials convening in Beijing would not be on the front lines of flood relief efforts, and if they do issue orders to “take command,” it would be absurd; public discontent is likely to escalate.
In late July 2023, floods engulfed the Beijing area, with CCP secretly instructing reservoirs to discharge water, resulting in major floods in places like Zhuozhou due to human-made actions. Although CCP officials were ordered to be at the forefront, they all left Beijing, heading to Beidaihe for vacation. Holding the Third Plenary Session during the flood season in July 2024 could lead to unforeseen political turmoil.
The Politburo meeting revealed the true state of the economy and displayed the CCP’s lack of governance yet again, potentially leading to more internal confusion. This seems to be the set theme for CCP politics in 2024.