Xi Jinping, China’s president since 2012, prepares to begin his second five-year presidency term. He fought alongside Mao Zedong during China’s communist revolution and he is now claimed to be the most powerful leader since Mao. How will that affect China’s economy and its economic growth?
China’s economic growth shifted from 7.9 percent in 2012 to 6.8 percent in 2017, which is the lowest it has been in 26 years. Analysts argue that China’s domestic political shifts suggest that the country is becoming more resigned to the reality of lower economic growth. While there could be swift progress in certain areas, some doubt that painful structural reforms will be pushed through.
Xi promised in an address to continue the economic reforms begun by Deng Xiaoping about 40 years earlier, saying:
“We will see that reform and opening up complement and reinforce each other. It is my conviction that the great rejuvenation of the Chinese nation will become a reality.”
Chinese companies’ global deal-making provides a clear example of the government’s willingness to intervene under Xi. Last year, Chinese companies splurged a record $170 billion on overseas deals, following calls from political leaders to increase China’s clout in international markets.
Xi’s consolidation of power will allow him to control the country’s economy. This should mean more rapid progress in some areas, such as efforts to address environmental concerns, but it seems unlikely to resolve many of the key structural problems that threaten China’s growth prospects.
Taking the huge buildup of debt since the global financial crisis as an example: China’s decade-long credit binge has fueled its economic growth, but corporate debt last year rose to a staggering 234 percent of gross domestic product.
Huge sums are also expected to be channeled into Xi’s grand plan for building up roads, ports and other infrastructure along the historic “silk road” trading routes across Asia, Europe, and Africa, which will massively increase its economic growth.
Under Xi, Chinese authorities have talked a lot about efforts to “deleverage” the economy and reduce risk in the financial sector. Moreover, banks are encouraged to lend to unproductive state companies, believing that the government will always bail these firms out if they get in trouble.
The New York Times’ Chris Buckley notes that Xi’s authority “is not directly comparable to the almost godlike influence Mao commanded,” but, at the same time, “the Chinese economy, state and military are much more powerful now than they were under Mao, or even under Deng, which gives Mr. Xi far more global influence than his predecessors.”
Xi Jinping is an example of how a communist country is able to recover any economic crisis and keep growing economically despite the world being against its growth.