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Andy’s view Almost 14 years into Xi Jinping’s norm-busting reign, just about everybody is unhappy with his economy. The rich have been stung by a surprise 20% tax on their offshore wealth, much of it squirreled away in trusts in Hong Kong and Singapore, triggering a new rush for foreign passports. The urban middle classes are in despair because the bursting of a real estate bubble — deliberately engineered by Xi — has evaporated the value of their main asset. And the rural poor, whose jobs are being displaced by factory automation, are grinding out longer hours for lower pay in the gig economy. Now, stocks have officially entered a bear market as investors abandon hope — and some of the biggest losers are high-profile tech companies, the avatars of Xi’s “new productive forces” that are supposed to replace real estate as the country’s main economic engine. The Nasdaq-style Star50 index, set up by Xi to help finance China’s high-tech transformation, has been one of the world’s worst- performing tech gauges this year. CATL, the battery giant, is down more than 50% from its highs; MetaX Integrated Circuits has shed around half its value. So, right on cue as the Communist Party’s top echelons gather in Beijing this week, the “national team” — huge state funds — has stepped in to rescue free-falling indexes. China’s casino-like stock markets have always been a poor barometer of the country’s economic health. But they drive sentiment, and a run of losses is further eroding morale as Xi uses the Central Committee meeting to kick off a year of politicking to extend his one-man rule for another five years. The bounce is unlikely to last. Increasingly, Xi’s starry vision of an AI-enabled economy is colliding head-on with structural realities — a shrinking workforce, rising debt, mounting geopolitical tensions. One might assume he’d be pushing pragmatic solutions since he’s put himself in charge of every major policymaking committee, and is thus personally on the hook. Indeed, international economists, including those at the IMF, are urging Beijing to spend more on basic welfare — medical cover, unemployment benefits, pensions — to boost consumer spending power. Instead, Xi is deflecting blame for policy failures. The problem, as he sees it, isn’t the policies themselves but inept implementation. And his prescription is tighter discipline — a major theme of the four day party meeting. The number of cadres punished for “formalism” and “bureaucratism” more than doubled between 2023 and 2025 to 118,000, although the habit of box-ticking is the predictable outcome of Xi’s rule by fear. A system that once rewarded policy entrepreneurship at a grassroots level is now marked by policy paralysis. Why risk taking the initiative if it might lead to a career-threatening mistake, or even a jail sentence? Xi himself seems to be prepping for a crisis, which is somewhat odd since, officially at least, the economy is comfortably on track to meet a 4.5-5% growth target this year. Headed into the Central Committee meeting, Xi delivered a speech to commemorate the 90th anniversary of the party’s Long March victory where he warned of “high winds and rough waves, even raging storms.” That’s an ominous sign for the world as Xi builds the walls of “Fortress China” ever higher. Trivium China, a research and business consultancy, assesses that “Xi is preparing the political ground for an economy that prioritizes resilience and technological self-reliance over faster growth.” Xi is sensitive to the darkening public mood. In fact, some Wall Street hedge funds have been collecting data on public protests from human rights monitors and others for clues to the next economic stimulus moves he might order. When all else fails, Xi can rely on the “national team” to keep animal spirits alive. The party has a long history of manipulating stock prices to ensure punters make money on their bets, or at least limit their losses. As in all gambling establishments, the house in China — CCP-backed funds — sets the rules. Notable - The journalist Michael Schuman argued in The Atlantic that Chinese firms’ reliance on the government — “an advantage that serves Beijing’s agenda” — is unwise: “Xi seems set on ushering in an era of greater economic conflict in which everyone loses.”
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