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  • Minxin Pei

How China Responded to its Economic Slowdown in 2023

Minxin Pei CLM Issue 78 December 2023
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Mikhail Mishustin and Li Qiang
After its zero-Covid lockdowns led to the worst economic growth in the last three decades, the Chinese government counted on a strong rebound in 2023 to make up for the lost ground. Despite the initial signs of recovery in the first quarter, the economy slowed down significantly in the second quarter. Constrained by Xi Jinping’s security-centered priorities, high levels of debt, and limited fiscal resources, China opted for modest stimulus measures and rhetorical reassurances in response. Analysis of Beijing’s response indicates that the technocrats lacked explicit and strong support from Xi, who said relatively little on the economy in 2023 and provided no clear guidance after the second quarter. The moderate recovery of the economy in the third quarter seems to have vindicated Xi’s cautious policy of “seeking progress on the basis of stability.” However, preliminary data for October suggest that economic weakness is likely to persist and that the factors behind the slowdown remain largely unchanged. Continuation of the current policy will make China’s efforts to build resilience far more costly than its leaders anticipate.

Immediately after Xi Jinping decided to end his zero-Covid policy at the beginning of December 2022, the party convened its annual Central Economic Work Conference (CEWC) from December 15 to 16. This particular meeting, attended by all senior leaders, ministers, and provincial party chiefs and governors, laid out five economic priorities for 2023: expansion of domestic consumption, accelerated construction of “modern production systems” (with a special focus on the security of supply chains, natural resources, and food), strengthening the competitiveness of state-owned enterprises while ensuring equal treatment for private businesses, attracting and utilizing foreign capital, and preventing and resolving major economic and financial risks (in particular by ensuring stable development of the real estate sector.”[1] On the eve of the CEWC, the party’s top leadership issued an important policy document, “Outlines for a Strategic Plan to Expand Domestic Demand, 2022–2035” (扩大内需战略规划纲要2022–2035年) and the National Development and Reform Commission (NDRC) issued a detailed plan to implement the strategy of expanding domestic demand during 2023–2025.[2] The timing of the release of these two economic policy documents underscores the centrality of expansion of domestic demand as China’s economic relationship with its Western trading partners, chiefly the U.S., is poised for further deterioration.

The party’s economic agenda appeared to be unusually ambitious. Even before the pandemic, the economy was showing significant weaknesses because of historically high levels of debt, a massive housing bubble, stagnant productivity growth, and trade tensions with the U.S. The self-inflicted devastation of Xi’s zero-Covid policy, in particular, the nationwide lockdown in 2022 that resulted in the lowest growth in the post-Mao era, made the task of reviving the economy extremely challenging.

Yet, judging by the bureaucratic mobilization in the wake of the CEWC, Chinese leaders appeared confident that they could deliver a much better economic record in 2023. On January 28, 2023, the day after the Chinese New Year holidays, more than ten provinces convened large conferences to rally local officials and signal a shift to economic growth. Guangdong reportedly held its largest conference in years, with more than 1,000 officials and businesspeople in physical attendance and over 25,000 people in virtual attendance.[3] Notably, like that in Guangdong, similar conferences in other provinces all featured the provincial party chief and governor as key speakers. Even though the substance of their speeches closely adhered to the party line, the fact that such high-profile conferences were held simultaneously across the country suggests that local officials interpreted the signal from the CEWC as a clear endorsement of a pivot back to economic growth.[4]

In retrospect, local officials were perhaps only partially correct in reading the signals sent by Xi himself. To be sure, his speech at the CEWC in December was released in mid-February, apparently to reaffirm his economic priorities.[5] But in a pattern that was to become more evident, and also possibly more confusing for local officials, Xi would seldom speak publicly on the urgency or importance of an economic recovery. Instead, he would focus far more often and more emphatically on security, ideology, and other issues.

For example, he organized a seminar on “Accelerate the Construction of a New Development Framework and Strengthen the Security and Initiative of Development” (加快构建新发展格局,增强发展的安全性主动权) for the Politburo on January 31. According to the official summary of Xi’s speech to the seminar, he primarily focused on the familiar theme of making the Chinese economy more secure and resilient through greater reliance on domestic demand and technological self-sufficiency. Missing from his speech were references to specific policies to address the immediate hurdles to recovery, such as the lack of support for the private sector, high debt, and the real estate crisis.[6]

On February 7, Xi delivered an important speech to the Politburo and the newly selected members of the Central Committee, ministers, provincial party chiefs, and governors. Instead of focusing on economic issues, this agenda-setting speech was an elaboration of “Chinese-style modernization,” the ideological leitmotif of the party’s 20th Congress in November 2022. Only at the end of the speech did he briefly mention the economic challenges of 2023. According to Xi, “stability” should be the guiding principle and “progress can be made only on the basis of stability,” signaling the leadership’s preference for marginal policy adjustments, not dramatic shifts.[7]

There can be several explanations for the apparent incongruity between the enthusiasm for the economy by local officials and the lack of urgency and priority publicly expressed by Xi. Most likely, after three years of Covid-19, local officials had a far more direct feel of the tough economic conditions as they had to deal with falling fiscal revenues, lackluster investments, and growing unemployment. They were eager to perceive the message sent by the CEWC as the party’s marching order for pivoting to the economy. But that was likely not Xi’s view. His assessment of the economy might not have been as dire as that of local officials. At the same time, he probably saw China’s security challenge as more serious than economic development. Even though Xi continues to say that China must maintain the right balance between development and security, his public speeches tend to emphasize the latter more than the former.

Greater Emphasis on Security than on Development

A quick review of the government’s policy measures in the first quarter shows that Beijing likely was counting on a recovering economy to produce its own momentum. As a result, it implemented practically no new measures to stimulate demand or revive confidence. The only step taken by the government was a modest reduction of bank reserve requirements, from a weighted average of 7.85 to 7.6 percent in March.[8] In the second quarter, there was a perceptible increase in the top leadership’s rhetorical emphasis on security, most probably because the robust economic recovery recorded in the first quarter, when GDP grew 4.5 percent compared with the first quarter of 2022, boosted Xi’s confidence in the resilience and dynamism of the economy.[9]

In the first quarter and most of the second quarter, it was easy to find evidence that the party was paying more attention to defending Xi’s authority, highlighting security challenges, and implementing a propaganda campaign to promote Xi’s new ideological formulation of “Chinese-style modernization.” A close reading of the communiqué of the second plenum of the new Central Committee, held from February 26 to 28, reveals that it devotes most of its space to a vigorous affirmation of Xi’s authority and achievements. Although the economy is discussed (in two paragraphs) at the end of the communiqué, the rhetorical emphasis is on the need to prepare for external threats. The phrase used in the communiqué, “surprise storms and terrifying waves” (惊涛骇浪), is commonly understood to refer to extreme scenarios of external economic and military conflicts.[10] Substantively, however, the plenum produced no new policy measures to stimulate growth.

On March 6, Xi dialed up the rhetoric on China’s security challenges a significant notch when he met a group of prominent businesspeople who represented the private sector at the annual session of the Chinese People’s Political Consultative Conference (CPPCC). Xi’s speech to this group, as reported in People’s Daily, highlighted the party’s accomplishments during the last five years before focusing on China’s deteriorating external environment. He then dropped the bombshell by, for the first time, publicly accusing the U.S. of “leading an all-around campaign of containment, encirclement, and suppression and creating unprecedented grave challenges to our country’s development” (以美国为首的西方国家对我实施了全方位的遏制、围堵、打压,给我国发展带来前所未有的严峻挑战). In face of this challenge, Xi reaffirmed the need to maintain “stability” in policy, implying caution in adopting new or radical measures. Even though Xi concluded his speech with his oft-repeated assurance that the party had always regarded private entrepreneurs as “family” (自己人), his reference to an American-led campaign of “containment, encirclement, and suppression” attracted most media attention and easily created the impression that security, not development, weighed more heavily on his mind. At the same time, as his rhetoric on the private sector repeated essentially the same party line, it did not sound sufficiently convincing to dispel the fears of the business community that the party under Xi’s leadership had turned against the private sector.[11]

Xi’s message on “unprecedented grave challenges” was reinforced in mid-April when the party’s flagship ideological outlet, Qiushi, published his January 31 Politburo speech that underscored the need for China to strengthen economic security through an expansion of domestic demand and development of indigenous technological capabilities.[12] The release of this speech was immediately followed by the publication of articles in the party’s mouthpiece, People’s Daily, on Xi’s concept of “comprehensive national security” written by two provincial chiefs, indicating that the top Chinese leadership wanted to ensure that its message on security was properly disseminated and received.[13]

The event that likely sent the strongest signal of the party’s focus on security was the first plenary meeting of the 20th CCP National Security Commission on May 30. Despite the sparse press coverage of the meeting, the grim picture of the security challenges it painted was difficult to miss. One phrase that appeared for the first time, maintaining a “mindset of extreme thinking” (极限思维), fanned speculation about both its meaning and policy implications.[14] Prior to its appearance in May, the preferred phrase was a “mindset of bottom line thinking” (底线思维), which Xi had frequently invoked in his speeches.[15] Whatever Xi meant by a “mindset of extreme thinking,” it was clear that he was urging the party and the Chinese people to prepare for worst-case scenarios of geopolitical tensions with the U.S. For the business community, such rhetoric could only dampen confidence.

Perhaps even more unsettling to domestic and foreign investors than the grim portrayal of China’s security challenges was a series of actions carried out by the government in the second quarter. If anything, they served to underscore that, for all the talk about balancing security with development, the party saw security as a more important and more urgent priority than development.

At the end of April, the National People’s Congress passed a revision of the Anti-espionage Law that granted China’s secret police significant new powers and that increased risks for foreign businesses operating in China.[16] This was followed by promulgation of the Foreign Relations Law. Its most noteworthy provision is the formalization of a policy of retaliation against foreign sanctions.[17] To be sure, this particular stance does not depart from other countries’ laws or practices. But the timing of its release could only strengthen the impression that China was not going to back down when the West, in particular the U.S., continued to roll out punitive measures against Chinese entities. Either by accident or by design, in the second quarter China unveiled a campaign, purportedly directed by the Ministry of State Security, that targeted U.S. consulting and due diligence companies.[18] Taken together, the rhetoric and actions of the party in the second quarter suggest that it was more focused on security than on economic recovery.

Response to the Slowdown in the Second Quarter

Signs that the economic recovery was running out of steam began to emerge in May. In early June, most indicators flashed orange. For example, industrial output grew only 3.5 percent, compared with 2022 (as China was under lockdown in May 2022, the anemic growth of industrial production in May 2023 belied far more serious weakness than it seemed). Retail sales, a key indicator of the recovery of consumption, grew 12.7 percent (down from the 18.4 percent recorded in April). Investment in the besieged real estate sector was collapsing at its fastest pace in two decades, falling nearly 22 percent in May compared with the previous year. Fixed asset investments by the private sector, which accounted for roughly 60 percent of overall investments, actually fell slightly as private entrepreneurs remained pessimistic about the economic outlook. Youth unemployment also reached a historic high of nearly 21 percent in May.[19]

When the National Bureau of Statistics released its data for the second quarter, it was clear that the economy was in deep trouble. Even though growth was 5.5 percent compared with that in 2022, when many parts of the country went into lockdown, real growth was only 0.8 percent compared with the first quarter of 2023. The housing sector showed further weakening while the consumer price index (CPI) fell 0.2 percent in June, indicating the beginning of deflation.[20]

On July 6 Premier Li Qiang, executive vice premier Ding Xuexiang, and the head of the NDRC held a rare high-level meeting with a group of academic economists (normally the premier alone would be present at such a meeting). This suggests that Xi’s economic team had become aware of the weakening economy before the release of the official data (on July 15). Even though the official press coverage of the meeting played up China’s positive economic factors, the fact that the top leaders on Xi’s economic team wanted to hear from relatively independent experts indicates that they were likely surprised by the downturn and felt an urgency to seek suggestions for a response.[21] In another unusual but significant gesture, Li, Ding, and Wu Zhengrong, head of the NDRC, met with the chief executives of China’s largest e-commerce platforms (such as Meituan, Douyin, and Alibaba Cloud) on July 12, apparently signaling a friendlier attitude toward a sector that had been the target of Xi’s crackdown only two years earlier.[22]

But the urgency felt by Xi’s economic team was not reflected in the readout of the Politburo meeting on July 24. The Politburo typically devotes three of its twelve monthly meetings to the economy (April, July, and December). The official summary of the Politburo meeting held on April 28 maintained a generally upbeat tone on the economy even though it pointed out that the improvement in the economy during the first quarter was mainly due to recovery.[23] The readout of the Politburo meeting on July 24 acknowledged the economic downturn, blaming it mainly on insufficient domestic demand and a “complex and grave external environment.” But the leadership tried to maintain its positive outlook, stating that China’s economy “possessed enormous developmental resilience and potential and its basic long-term positive trends have not changed.” Most notably, the Politburo insisted that the country’s economic policy for the second half of the year would continue to be “progress based on stability,” implying no major shift in policy despite signs of a stalled recovery. On the critical issue of local government debt, the readout referred to the making and implementation of an unspecified “packaged solution” (一揽子化债方案).[24] Based on official press reports, in early August top leaders met in Beidaihe, their customary summer resort.[25] But the leadership appears to have approved only modest monetary easing, as indicated by the cut in some interest rates by the People’s Bank of China (PBOC).

A review of the measures adopted by Beijing after July shows that the leadership followed a two-pronged approach – rhetorical support for the economy and modest monetary loosening. Even though Beijing has repeatedly declared the importance of expanding domestic demand and the NDRC duly issued a policy document on measures to promote consumption at the end of July, the party was unable to back up its rhetoric with material support.[26] The absence of major fiscal policy measures to stimulate domestic demand (such as tax cuts, fiscal transfers, and an increase in public spending on social services) likely reflects both the country’s stretched budget and Xi’s assessment that the economic slowdown was likely temporary.[27]

Rhetorical support appeared to be the leadership’s preferred tool in late July and August to boost confidence in the economy. The most important factor influencing the choice of this approach was likely the lack of fiscal and monetary resources due to high levels of debt and deficit. Another likely reason behind a strategy of “talking up the economy” was the Chinese leadership’s assumption that a propaganda campaign, coupled with the introduction of mostly symbolic measures to support the private sector and boost consumption, could improve confidence. In talking up the economy, the party’s priority audience was the country’s private sector. On July 21, three days before the monthly Politburo meeting, Xi met a group of prominent individuals representing the so-called “democratic parties” and private businesses. As the party usually convenes such high-profile meetings to rally support of aligned social elites, this meeting signaled that Xi was reaching out to a crucial non-party constituency to bolster its confidence in the economy.

The importance that the leadership attached to this meeting was evidenced by the attendance of Xi, Premier Li, and all four vice premiers of the State Council. In his speech to the gathering, Xi first gave a positive spin on the economic situation and stuck to his usual talking points about boosting domestic demand and technological upgrading. The most noteworthy part of his speech was calling on these groups to align their assessments of the economic situation with those of the party, assist the party in raising confidence. and “strengthen the political guidance of the thinking of private economic actors” (强化对民营经济人士的思想政治引领).[28]

To bolster its credibility, the party’s central leadership and the State Council issued a joint policy document on July 19, titled “Opinions on Promoting the Development and Growth of the Private Sector” (中共中央国务院关于促进民营经济发展壮大的意见). Despite the pro-business impression the party hoped to create with the release of this document, it was likely drafted in a rush as it contained mostly clichéd declarations and no specific policies.[29] A few days after the release of this document, the NDRC issued a notice on promoting private investment.[30] In a sign of bureaucratic overkill that fits the classic pattern of a well-coordinated propaganda campaign orchestrated to impress the top leadership, the NDRC, the Ministry of Finance, and six other ministry-level agencies jointly issued a notice on August 1 announcing implementation of a set of “short-term measures to promote development of the private sector.”[31] At the beginning of September, the NDRC announced that it had set up the “Bureau for the Development of the Private Economy” (民营经济发展局).[32]

Besides domestic private entrepreneurs, Beijing also tried to woo foreign investors. On August 14, the State Council issued a new policy document on attracting foreign investment. However, like other policy documents unveiled in July and August, the State Council’s “Opinion to Further Improve the Investment Environment for Foreign Businesses” is filled with generalities and declarative language instead of specifics.[33] With the tense geopolitical relations between China and the U.S. and the party’s seeming unwillingness to roll back its campaign to boost security and its anti-espionage measures, such a policy was unlikely to change foreign investors’ pessimistic outlook for China.

If Chinese leaders had hoped that these mainly symbolic measures could boost the confidence of private entrepreneurs, they were in for deep disappointment. All the measures rolled out after July share several commonalities: they are largely regurgitations of slogans, aspirational goals, and vague promises. Having witnessed and having directly felt the impact of the party’s business-unfriendly policies under Xi’s watch, savvy private entrepreneurs were looking for specific substantive policy measures or political steps signaling a fundamental shift in the party’s management of the economy and its attitude toward the private sector. Soothing rhetoric was not enough to change their view that China’s economic prospects were unlikely to improve substantially as long as the leadership continued to pursue its current domestic and foreign policies. Strikingly, the party did not bother to reverse some of the policies or decisions that had probably fatally undermined its credibility among private entrepreneurs, such as the long prison sentences for well-known outspoken entrepreneurs like Ren Zhiqiang and Sun Dawu (both sentenced to eighteen years for criticizing Xi’s policies) or the harsh and arbitrary ban of after-school tutoring in 2021.

The party’s efforts to talk up the economy can also be seen in press briefings and positive spins on the economic conditions by leading official media outlets. On July 18, several officials of the NDRC gave a press briefing accentuating the positive aspects of the economy, in particular its resilience and long-term potential.[34] On the same day, People’s Daily highlighted the “bright spots” in the economic data for the first half of the year and underplayed the weaknesses.[35] A few days later, the paper published, also on its front page, a long article celebrating the economic achievements in the first half of 2023.[36] On August 1, People’s Daily ran a long interview with the head of the NDRC, who gave an upbeat assessment of the economy.[37] An editorial prominently displayed on the front page of People’s Daily on August 3 by “Zhong Yin” (仲音), which is typically used to signal the top leadership’s intention (the sound of “zhong yin” is the same as “the center’s voice”), repeated Xi’s mantra of “seeking progress amid stability” (稳中求进).[38] To ensure that the party’s positive spin on the economy would not be challenged by bad economic news, the National Bureau of Statistics announced in mid-August that it would stop releasing data on youth unemployment, a politically sensitive issue (in June it had reached a new high of 21.3 percent).[39]

Judging by the timing of these announcements, the relatively modest monetary policy measures were likely approved by the top leadership at the Beidaihe gathering in early August. On August 21, the PBOC cut the one-year prime loan rate (LPR) from 3.55 to 3.45 percent while keeping the rate for the five-year LPR unchanged. This was the second time the PBOC cut interest rates. (In late June it cut both the one-year and five-year LPR by 10 basis points.)[40] Even though these two rates determine the cost of credit for most borrowers, the marginal cut was unlikely to make a huge difference in borrowing costs, especially for borrowers with a pessimistic outlook on the economy.

At the end of August, the PBOC and the newly established National Administration of Financial Regulation (国家金融监督管理总局) issued two directives to breathe some life into the crisis-ridden housing market. The amount of a downpayment for first-time homebuyers was cut from 30 to 20 percent of the loan amount. In addition, the mortgage rate for first-time homebuyers was also lowered by half a percentage point, potentially saving purchasers 200 billion yuan.[41]

In mid-September, the PBOC took an additional step to ease access to credit by cutting the bank reserve requirement by 25 basis points (to a weighted average of 7.4 percent), marking the second time the central bank cut the reserve requirement (the first cut was announced in March). As each cut was estimated to make about 500 billion yuan available for lending, the two cuts together freed up a lending capacity roughly equivalent to 0.8 percent of GDP, unlikely sufficient to boost the economy.

On the fiscal side, the National People’s Congress Standing Committee approved the issuance of 1 trillion yuan in special treasury bonds ($137 billion) on October 24, 2023, mainly to support local governments. Ostensibly, the funds would be spent on aid to areas that had been hit hard by natural disasters. Given the relatively small size of the package, it will have only a modest impact on growth.[42]

Chinese policymakers were severely constrained in deploying monetary tools aggressively because the aggregate debt level of the economy, estimated to be close to 300 percent of GDP (for non-financial entities), was already too high for comfort.[43] China may already have fallen into a liquidity trap, a situation in which any additional injection of credit or liquidity is unlikely to stimulate spending, so cutting interest or reserve rates may not have much of an impact. At the same time, a further reduction of interest rates could increase downward pressures on Chinese currency, which had been depreciating against the dollar throughout 2023.[44]

Concluding Thoughts

Much to the relief of the Chinese government, the economy performed better in the third quarter. Nominal growth was 4.9 percent from July to September compared to that in 2022, exceeding the forecast of an average of 4.6 percent. On a quarter-on-quarter basis, the economy grew 1.3 percent, materially better than the 0.5 percent recorded in the second quarter. However, the data for the third quarter indicate that the vital property sector had not stabilized despite a modest recovery in consumer spending. If this momentum continues into the fourth quarter, China is on course to achieve its annual growth target of 5.0 percent. Preliminary data for October show that the economic recovery remained fragile. On the positive side, consumption rose 7.6 percent compared with a year ago (the baseline for October 2022 was very low due to covid lockdowns). But there was more negative news: manufacturing activities contracted while exports fell 6.4 percent, registering six consecutive months of decline.[45]

The moderately good news of the third quarter and indication of continuing weaknesses in October most likely will reinforce Xi’s “stability-first” approach. This analysis shows that, in response to unanticipated economic weakness in the second quarter, Chinese leaders counted on a propaganda campaign, coupled with modest monetary measures, to revive the economy instead of pursuing more aggressive measures, such as a substantial fiscal and monetary stimulus or reversal of prior policies that were seen as unfriendly to private entrepreneurs and foreign investors. Although we may not know immediately whether China can actually “seek progress amid stability,” we can point to several explanations for Xi’s approach.

First, the modest monetary measures introduced in July and August reflect the harsh reality of the Chinese economy. The high fiscal deficit and record-level debt limited Beijing’s capacity to use these two levers to stimulate growth, as it had done in the past. Signs of deflation implied that aggressive monetary measures would merely exacerbate the problem of a liquidity trap, whereby an injection of additional credit would have no impact on borrowing and spending. The main cause of the slowdown – an imploding real estate sector – is also a highly complex challenge defying a quick solution. In other words, the deterioration of the economy that Xi confronted in 2023 was the most difficult in China’s post-Mao era due to its complex nature and the severe fiscal and monetary constraints imposed on the Chinese state.

Second, Xi’s own assessment, priorities, and political interests likely determined the adoption of this approach. Based on Xi’s speeches and activities, he seemed more confident in the resilience of the economy than his economic team was (his public speeches and appearances were more related to security and ideology than to the economy). Politically, launching a full-fledged campaign to revive growth might conflict with Xi’s security-centered agenda and personal interests. A new agenda tilting toward growth could dilute Xi’s efforts to strengthen his emphasis on “holistic security,” as necessary compromises would have to be made to increase efficiency by maintaining existing channels of economic integration with the West and perhaps curtailing his anti-espionage campaign. Prioritizing the economy could even undermine his power. Xi’s strong suit is power politics, not economic management. As a refocus on the economy would require decentralization of power and delegation of authority to economic technocrats, his economic team would likely gain greater visibility and take credit for subsequent improvement in the economy. Xi could not have been unaware of the sidelining of Mao Zedong after the Great Leap famine in the early 1960s. In the wake of the catastrophic famine, the late dictator was forced to cede economic policymaking to pragmatists. The loss of power embittered him and contributed to his decision to launch the Cultural Revolution to take back power.

An additional concern for Xi is the risk of reversing his policies seen as responsible for undermining confidence in the economy, such as discrimination against the private sector and a confrontational foreign policy toward the West. While highly desirable, if not absolutely necessary, such policy corrections might seriously undermine Xi’s authority and raise questions about his leadership and record. Indeed, there were tantalizing signs that Xi’s sense of security might have been undermined by the worsening economic situation and he has responded with an intensification of “anti-corruption” investigations. As of the end of October, thirty-nine “centrally supervised cadres” (中管干部) had been investigated for alleged corruption, a record since Xi launched his anti-corruption drive (although most of the officials arrested this year, excluding Foreign Minister Qin Gang and Defense Minister Li Shangfu who were dismissed but not formally investigated, held more junior positions than those purged by Xi in 2013–2014). Some were retired high-ranking officials, including the former party chief of Guizhou. This was twice the number of “centrally supervised cadres” investigated in 2019, the year before the Covid pandemic. At the height of Xi’s “anti-corruption” campaign in 2014, the party investigated thirty-eight centrally supervised cadres.[46]

Finally, Beijing’s response to the economic downturn indicates that Xi’s economic team lacks autonomy. Initially, one might offer a more benign interpretation of Xi’s decision to pack his economic team with loyalists, most of whom boast reasonably good technocratic credentials. Such a team could have been more effective in boosting the economy after the end of zero-Covid. But it is now becoming evident that Xi picked this team to carry out a security-centered economic agenda, and his loyalists, however eager they might be to establish their credibility on the economy, have no choice but to bow to Xi’s wishes.

About the Contributor

Minxin Pei, the editor of China Leadership Monitor, is the Tom and Margot Pritzker ’72 Professor of Government and George R. Roberts Fellow at Claremont McKenna College. He is also a non-resident senior fellow of the German Marshall Fund of the United States. His books include China’s Trapped Transition: The limits of Developmental Autocracy (2006), China’s Crony Capitalism: The Dynamics of Regime Decay (2016); The Sentinel State: Surveillance and the Survival of Dictatorship in China (2024).


[1] “中央经济工作会议举行 习近平李克强李强作重要讲话,” 新华社, December 16, 2022, [2] 中共中央 国务院印发《扩大内需战略规划纲要(2022–2035年)》, December 14, 2023,; 国家发展改革委“十四五”扩大内需战略实施方案,” December 14, 2022,

[3] “政府全力拼经济,”February 4, 2023,

[4] “王伟中同志在广东省高质量发展大会上的讲话实录,” January 28, 2023, ; 陕西开展高质量项目推进年、营商环境突破年、干部作风能力提升年“三个年”活动动员会,January 28, 2023, ; “全区招商引资暨化营商环境大会在呼和浩特召开, January 30, 2023,

[5] 习近平,”当前经济工作的几个重大问题,” February 15, 2023,

[6] “习近平主持中共中央政治局第二次集体学习并发表重要讲话,” February 1, 2023,

[7] “习近平在学习贯彻党的二十大精神研讨班开班式上发表重要讲话,” February 7, 2023,

[8]央行决定降准0.25个百分点,”人民日报, March 17, 2023,

[9] “2023年一季度国内生产总值初步核算结果,” April 19, 2023,

[10] “中国共产党第二十届中央委员会第二次全体会议公报,” March 1, 2023,

[11] “习近平在看望参加政协会议的民建工商联界委员时强调正确引导民营经济健康发展高质量发展,” March 7, 2023,

[12] 习近平, ”加快构建新发展格局 把握未来发展主动权,” April 15, 2023,

[13] 倪岳峰, “深入贯彻总体国家安全观 打造更高水平的平安河北,” 人民日报, April 17, 2023, p. 10, ; 林 武, “全面落实党的二十大精神 在构建新安全格局中贡献山东力量,” 人民日报, April 17, p. 10,

[14] “习近平主持召开二十届中央国家安全委员会第一次会议,” May 30, 2023,

[15]近平,“坚持底线思维、问题导向,把防范化解风险挑战摆在突出位置,” June 21, 2022,

[16]中华人民共和国反间谍法,” April 27, 2023,

[17] “中华人民共和国对外关系法,” June 29, 2023,

[18] Lingling Wei, “China Puts Spymaster in Charge of U.S. Corporate Crackdown,” Wall Street Journal, May 18, 2023,

[19] Ellen Zhang and Kevin Yao, “China's Economy Slows in May, More Stimulus Expected,” Reuters, June 15, 2023,

[20] “上半年国民经济恢复向好,” July 17, 2023, ; Keith Bradsher, “China’s Rebound Falters, Tripped Up by Debt and Weak Exports,” The New York Times, July 16, 2023,; “6月CPI同比持平PPI同比下降,”人民日报, July 10, 2023, p. 3.

[21]李强主持召开经济形势专家座谈会,丁薛祥出席,”人民日报, July 7, 2023, p. 1.

[22] “李强主持召开平台企业座谈会,丁薛祥出席, “人民日报, July 13, 2023, p. 1.

[23] “分析研究当前经济形势和经济工作,中共中央总书记习近平主持会议,” 人民日报 , April 29, 2023, p. 1.

[24] 中共中央政治局召开会议 分析研究当前经济形势和经济工作 中共中央总书记习近平持会议, Xinhuawang, July 24, 2023,

[25] “蔡奇看望慰问北戴河暑期休假专家,” 人民日报, August 4, p. 1.

[26] “国务院办公厅转发国家发展改革委关于恢复和扩大消费措施的通知,” July 28, 2023,

[27] China’s real budget deficit for 2023 may reach 7.4 percent of GDP, according to an estimate by CSIS, “Making Sense of China’s Budget,” ChinaPower,

[28] “就当前经济形势和下半年经济工作 中共中央召开党外人士座谈会,“ Xinhuashe, July 24, 2023,

[29] “中共中央国务院关于促进民营经济发展壮大的意见,” 人民日报, July 20, 2023, p. 1.

[30] “国家发展改革委关于进一步抓好抓实促进民间投资工作努力调动民间投资积极性的通知,”

[31] “国家发展改革委等部门关于实施促进民营经济发展近期若干举措的通知,” August 1, 2023,

[32] “国家发展改革委设立民营经济发展局 统筹协调营造更优发展环境,” Jingji ribao, September 5, 2023,

[33] 国务院印发关于进一步优化外商投资环境 加大吸引外商投资力度的意见, August 13, 2023,

[34] “国家发展改革委有关负责同志解读当前经济形势,”人民日报, July 19, 2023, p. 10.

[35] “上半年国内生产总值同比增长5.5%,” 人民日报, July 18, 2023, p. 1.

[36] “高质量发展迈出新步伐,”人民日报, July 23, 2023, p. 1.

[37] “中国经济发展具有良好支撑和有利条件—访国家发展改革委主要负责同志,”人民日报, August 1, 2023, p. 2.

[38] 仲音,”笃定信心、稳中求进,实现既定目标,”人民日报, August 3, 2023, p. 1. [39] “China Stops Releasing Youth Unemployment Rates Amid Economic Gloom,” The Guardian, August 15, 2023,

[40] “年内第二次“降息”释放积极政策信号,”Xinhuashe, August 21, 2023,

[41] “中国人民银行 国家金融监督管理总局关于调整优化差别化住房信贷政策的通知,” August 31, 2023, ; “China's Major Banks To Lower Rates on Existing First-home Mortgages,” Reuters, September 7, 2023,,(%2427.31%20billion)%20per%20year

[42] “两部门详解1万亿元增发国债,”October 25, 2023,

[43] Bank of International Settlements,

[44] “央行决定降准0.25个百分点,”Xinhuawang, September 14, 2023,

[45] Bloomberg,; AP,; CNN,'s%20massive%20manufacturing%20sector%20has,Statistics%20(NBS)%20on%20Tuesday.

[46] “三个月两高官被查 黑龙江省委再表态,” September 16, 2023, ; “2019年反腐败 ‘成绩单’亮眼,” January 3, 2020, ; “今年来中国被查中管干部达24人 今年落马中管干部可能创10年新高,” Lianhe zaobao, June 25, 2023,

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