The Chinese economy is slowing down rapidly, and there are signs that deflation may be setting in. This is due in large part to the political decisions of Xi Jinping, who has consolidated power and centralized control over the economy.
One of Xi’s key policy goals has been to reduce financial leverage and debt. This has led to a credit crunch, which has made it more difficult for businesses to borrow money and invest. As a result, investment has slowed down significantly.
Xi has also cracked down on the private sector, which has been the main driver of economic growth in China in recent years. This crackdown has led to a decline in entrepreneurial activity and innovation.
In addition, Xi’s focus on political ideology over economic efficiency has led to a misallocation of resources. For example, the government has invested heavily in state-owned enterprises, which are often inefficient and unprofitable.
As a result of these policies, the Chinese economy is slowing down rapidly. The GDP growth rate is expected to fall to below 5% in 2023, the slowest pace in decades. There are also signs that deflation may be setting in. The PPI has been falling for more than a year, and the CPI growth rate has slowed down significantly.
The Chinese government is trying to stimulate the economy with fiscal and monetary stimulus measures, but it remains to be seen whether these measures will be enough to prevent deflation. If deflation does occur, it could have a significant impact on the global economy.
Specific examples of Xi’s political decisions that have contributed to the economic slowdown:
Crackdown on the tech sector: Xi’s government has launched a series of crackdowns on the tech sector, including Alibaba, Tencent, and Didi Chuxing. These crackdowns have led to a decline in investment and innovation in the tech sector, which has been a major driver of economic growth in China.
Common Prosperity campaign: Xi’s Common Prosperity campaign is an attempt to reduce income inequality in China. However, the campaign has also led to increased regulation of the private sector and a decline in entrepreneurial activity.
Zero-COVID policy: Xi’s government has implemented a strict Zero-COVID policy, which has led to lockdowns and other disruptions to economic activity. The Zero-COVID policy has also made it difficult for businesses to operate and has dampened consumer spending.
Xi Jinping’s political decisions have created a more uncertain and unpredictable environment for businesses in China. This has led to a decline in investment and innovation, and has contributed to the economic slowdown.