After more than a decade under Xi Jinping, China has emerged as a formidable industrial and military power, but with a strained economy. While China's military has significantly modernized and industry and technology have come to compete directly with the United States, the economy has lagged behind, marked by declining consumer confidence, a housing crisis and slowing growth, the WSJ reports.
This discrepancy reveals how Xi Jinping has emphasized national security and technological self-sufficiency, while the economy has been put on the back burner. Thus, huge sums are directed to areas considered strategic: artificial intelligence, semiconductors, electric vehicles, robotics and agriculture. At the same time, economic reforms aimed at boosting job creation have been kept in place.
This strategy is part of Xi Jinping's vision of “national revitalization,” whereby China strengthens its position in future industries and expands its military capabilities. On the other hand, traditional sectors of the economy, especially real estate, collapsed, severely affecting the population's income, consumption and confidence in the future.
The housing market crash wiped out trillions of dollars in income and eliminated many jobs that could not be replaced as quickly. In many industrial cities, factories remain empty and “for rent” signs have become a common sight.
Cities in economic distress
In Foshan, a major manufacturing center near Hong Kong, economic growth has almost completely stagnated. Local authorities have set out to turn the city into a robotics hub, but the industry is too modest to offset the overall decline. Workers describe an atmosphere of increasing insecurity, where stable jobs are becoming the exception, not the rule.
“Now, everyone is afraid that there will be no money left to earn next year,” commented Yang Guolü, a real estate agent for local factories.
Massive investments in security and technology
Under Xi, military spending has doubled and China has continued to expand its nuclear arsenal and naval capabilities, including by building modern aircraft carriers. In parallel, budgets for education and social services grew much more slowly, which accentuates the perception of an imbalance between investments.
In cities like Xi'an, for example, authorities have cut spending on infrastructure and education while significantly increasing investment in science and technology.
A slower economy and a more cautious society
Although China's economy continues to grow, the pace is much slower than during the period of rapid expansion before 2010. Growth of about 5 percent over the past year is considered insufficient to offset losses in the real estate sector and support a robust labor market.
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Economists say that massive investment in strategic sectors, while useful in the long term, does not generate enough jobs in the short term. In addition, the lack of an extensive social protection system is causing many Chinese to save more and consume less, further slowing the economy.
For many citizens, the effects are direct. Factory workers accept lower wages than in previous years, and young graduates face difficulties in finding stable employment. In some cases, people with professional experience accept salaries close to internships, just to stay on the job market.
In industrial cities, former employees describe a reality where job security, once guaranteed, has disappeared. Many fear that they will have to depend on family in the absence of stable opportunities.
The power of projection
The Chinese government justifies this orientation by the idea that national security is an essential condition for development. In Xi Jinping's view, strengthening state power and technological independence are more important than quick economic adjustments.
In his most recent annual New Year's address, Xi avoided almost any mention of economic issues. Instead, he pointed out that China's national power has “reached new heights.” As evidence of the nation's progress, he cited the launch last year of China's most advanced aircraft carrier and new robots that practice kung fu, writes the WSJ.
China's belief that its power is growing—and that the West is in decline—has made it more willing to fight back when challenged. Beijing acted to limit exports of critical minerals to the US last year amid an escalating trade war between the two countries that threatened US factories. At the same time, aggressive military maneuvers near Taiwan have raised concerns about a global crisis over the island.
In its latest annual assessment of the power of Asian countries, the Lowy Institute, an Australian think tank, ranked the US as stronger but concluded that China had closed the gap. The analysis was based on 131 indicators, in areas such as economic and military capacity, defense partnerships and diplomatic influence.
Focusing more on political and security interests than his predecessors, Xi has signaled that China faces more imminent threats today than in the past. US military operations against Venezuela and Iran, both close partners of China, have deepened Beijing's mistrust of Washington.i.
“Although reasserting the party's control over the economy is costly, it is a price they feel is worth paying if they risk eroding the party's power,” said Minxin Pei, a scholar of Chinese politics at Claremont McKenna College.
