15.5 C
New York
Friday, May 17, 2024

China’s Economic Crisis | Xi Jinping’s Solution | More Debt

China’s Economic Crisis | Xi Jinping’s Solution | More DebtThe Return of Xi Jinping

China’s President, Xi Jinping, has recently returned to the limelight after a period of absence. He had notably skipped the G20 Summit in India and dismissed two ministers without providing any reasons. Despite the world’s curiosity, the Chinese president remained tight-lipped, sidestepping recent scandals as if they never occurred.

China’s Economic Crisis | Xi Jinping’s Solution | More Debt

Xi Jinping chose to focus solely on the economy during his recent visit to China’s Central Bank. This visit was not widely publicized, resulting in limited information available to the public. However, it is known that Xi Jinping was accompanied by his top team, including a Vice Premier. This visit is being called a first, as there are no public records of him visiting the Central Bank or chairing any meetings there during his decade-long presidency.China’s Economic Crisis | Xi Jinping’s Solution | More Debt

China’s Economic Struggles

China’s economy has been struggling on multiple fronts. There is a job crisis with millions of people unemployed, businesses are nervous, and local governments are burdened with debt. For months now, Beijing has been firefighting. It rolled out some measures, tinkered with policy, and even offered assurances. However, China’s economy remains on shaky ground.China’s Economic Crisis | Xi Jinping’s Solution | More Debt

Investors have been hoping for an intervention that comes straight from the president to restore confidence. However, until this week, the president had avoided these appeals. He finally relented and delivered a message during his visit to China’s Central Bank: he won’t tolerate a slowdown.China’s Economic Crisis | Xi Jinping’s Solution | More Debt

Beijing’s New Plan

Along with this message came an announcement: Beijing is making changes to its government budget. They plan to issue new bonds worth 1 trillion Yuan or about $137 billion. This is an unusual move as China rarely revises its budget – not even during the pandemic did they revise the budget to allocate more funds.China’s Economic Crisis | Xi Jinping’s Solution | More Debt

The last time China revised its budget was in 2008 following a massive earthquake in Sichuan that claimed more than 69,000 lives. Now, 15 years later, China’s economic fault lines are rupturing in a crisis no less severe than an earthquake.China’s Economic Crisis | Xi Jinping’s Solution | More Debt

More Debt: A Solution?

In response to this crisis, Xi Jinping is revising the budget and offering more debt. China’s local governments owe more than $7 trillion in debt. Beijing is offering them just $137 billion – a drop in the ocean that will undoubtedly relieve some burden but won’t solve their problem.China’s Economic Crisis | Xi Jinping’s Solution | More Debt

The local governments are under stress while the central government has room to borrow. However, this approach is not sustainable. China cannot keep borrowing its way out of this mess; it needs sound policy interventions to revive the economy.

Cabinet ReshuffleChina’s Economic Crisis | Xi Jinping’s Solution | More Debt

Stability is the need of the hour, but Xi Jinping is still rocking the boat. Earlier this week, he sacked his Finance Minister Liu Kun, and named a technocrat called Lan Fo’an as his replacement Finance Minister.China’s Economic Crisis | Xi Jinping’s Solution | More Debt

Reports suggest this reshuffle was planned; last month Lan was given a promotion and named chief for finance by the Communist Party. He now has a specific mandate to handle local government debt and has been asked to come up with a plan to defuse this debt crisis.

However, Xi’s cabinet is like a revolving door; he hires and fires ministers at will and also makes them disappear. So Lan’s biggest challenge may not be the economy after all; it will be keeping his job and ensuring that he doesn’t disappear.China’s Economic Crisis | Xi Jinping’s Solution | More Debt

Related Articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest Articles

Translate »