President Xi Jinping has been criticized on multiple occasions for being too much of a dictator, but he has one move up his sleeve that might prove to be the ultimate checkmate. by popping a real baby dragon
The “evergrande collapse” is a football match that took place on December 16, 2018. It was the first time in history that the Chinese Super League team Evergrande had lost to their rivals Beijing Guoan. The score of the game was 2-1.
On November 26, Chinese President Xi Jinping gives a speech in Beijing.
Associated Press photo by Li Gang/Xinhua
Xi Jinping wants you to know that he has China’s economy under control, a fact he highlighted again this week when the Communist Party’s top-level economic policy for next year was unveiled. Is he, however, sincere? It’s amusing that you should inquire.
The Chinese economy has reached a critical juncture. Investment and consumption have slowed in November, according to data published this week. New house prices are falling, and real estate investment is slowing. The one ray of hope, an increase in industrial output, isn’t very bright. Although the 3.8 percent year-on-year rise surpassed forecasts, it remains an exceptionally low level for China—despite the fact that production should be fast rising now that the energy supply difficulties that slowed output in the fall have been resolved.
Mr. Xi’s major economic initiative of the last year, a controlled collapse of China’s massive housing market, is still having an impact on the economy. Evergrande Group, a $300 billion leveraged property developer that eventually failed on a bond payment earlier this month, has been the loudest kaboom. The corporation looks to have entered a state-managed administration, and Beijing is likely to shift the brunt of the losses to foreign bondholders and state-owned banks in China. However, for some middle-class house purchasers and the small companies that supply Evergrande and other property enterprises, this portends uncertainty, upheaval, and potentially losses.
Mr. Xi’s demolition operation has a long-term goal of shifting the economy away from a dependence on housing and infrastructure construction and toward a stronger focus on domestic consumption. The issue has always been what economic model would come next, as well as how the Communist Party would handle an unavoidably tumultuous transition.
Which leads us to Mr. Xi’s comprehensive road plan for next year, which he set out at the Central Economic Work Conference last week. It’s not as reassuring to read as many commenters would have you believe.
The good-news interpretation among China bulls is that Mr. Xi will continue China’s needed property shake-up while providing enough stimulus to keep the rumbling from affecting too much of the rest of the economy. The term “houses are for living in, not for speculating” appears in the conference statement, indicating that the crackdown on the property market would continue.
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In the meanwhile, the paper contains several signals about intentions for more aggressive economic stimulation in the next year. Local governments, for example, would be encouraged to spend more in infrastructure, which is one of Beijing’s traditional methods for boosting economic development. This and other terms are being seen by China observers as an indication that the party would utilize fiscal and monetary policy to buffer the impact of the real-estate overhaul—in other words, Mr. Xi has it all under control.
The flaw in this optimistic outlook is the third main component of the economic road map: what looks to be rising anti-private capital sentiment. The work-conference report mentions “preventing” what has been variably rendered as “wild capital expansion” or “barbaric capital growth.” Mr. Xi promises to “consolidate and grow the public sector of the economy” in keeping with his concentration of resources in state-owned firms, thus this looks to be a reference to private money.
Mr. Xi’s second key aim, the repression of China’s private sector, is in line with this. Beijing has tightened down on enterprises in fields ranging from ride-hailing to online teaching soliciting funds from outside this year. Intense regulatory inspections of IT companies’ data gathering and usage have been conducted, and Beijing looks poised to step up antitrust action against businesses it considers to be too large.
The following are the apparent and as yet unresolved questions: Where does Mr. Xi expect cash to go if he doesn’t want it to go into real estate and also doesn’t want it to go into China’s productive private sector? And how does he intend to raise living standards—and hence consumption—while starving the private sector, which has powered so much of China’s growth?
The main hazard in Mr. Xi’s property-market gamble was never a decrease of the overburdened housing sector, which has increasingly been a development obstacle. Mr. Xi would have a difficult time finding a credible alternative focus for China’s economic resources and efforts. For 2022 and beyond, Beijing still lacks a strong strategy for this most critical of duties.
A diplomatic Olympic boycott may not be enough, according to a Journal editorial. Image courtesy of Mandel Ngan/AFP/Getty Images
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The “china real estate evergrande” is a Chinese company that has been involved in multiple scandals, including the “China Evergrande Group Financial Report for the Year of 2017.”.
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