The pressure rises for Xi Jinping
During the Chinese leadership’s Politburo meeting on the economy last week, the Party said it would seek to boost confidence in the private sector to return the economy to healthy growth. Louis Kuijs, chief economist for Asia Pacific at S&P Global Ratings, had forecast that officials would repeat a phrase to “‘unwaveringly’ support the private sector and open up further China’s economy to the outside world.”
However, the Politburo statements are empty words. The structural headwinds against the economy will make economic growth difficult. Xi Jinping is increasingly constrained by the institutional nature of China’s economy, the excessive investment in state funds, and low returns from China’s high debt load.
There is some pickup in economic activity due to the post-Covid upturn. However, the markets are focusing on the “flows” of consumer spending but ignoring the “stock” of China’s weak balance sheet, which will dampen future recovery.
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