As China faces its biggest trade war with the US, Xi Jinping must confront his nation’s deep-seated economic and social challenges. Can he turn the crisis into a catalyst for change and secure China’s place in the world?
The Real Test for Xi Jinping
President Xi Jinping‘s confidence in the face of Donald Trump‘s trade war is not just about his ability to withstand external pressure. It is also a reflection of his domestic challenges and the opportunities he sees in the crisis.
Xi Jinping is a Chinese politician who has been the General Secretary of the Communist Party of China (CPC) since 2012.
He became the President of China in 2013 and was re-elected for a second term in 2018.
Xi rose to power after serving as the Governor of Fujian Province and the Communist Party Chief of Shanghai.
He implemented significant economic reforms, including the Belt and Road Initiative (BRI) , which aims to connect China with other countries through infrastructure development.
Under his leadership, China has become increasingly influential globally.
A Struggling Economy
China’s domestic market has never been more important, with a population of 1.4 billion. However, there are concerns that Chinese families are not spending as much as their government would like. The collapse of the housing market has led to many families investing their life savings in homes, only to watch prices plummet over the last five years.
The housing market has undergone significant changes over the past few decades. Factors such as urbanization, gentrification, and technological advancements have influenced property prices and rental rates. According to a report by Zillow, the median home value in the United States increased from $147,000 in 2000 to $270,900 in 2020. Similarly, rent growth has accelerated, with the average rent for a one-bedroom apartment rising from $600 to over $1,100 during the same period.
The former deputy head of China’s statistics bureau, He Keng, admitted two years ago that there are enough vacant homes for 3 billion people. Travel round Chinese provinces and you see they are littered with empty projects – lines of towering concrete shells that have been labelled ‘ghost cities’. Others have been fitted out, the gardens have been landscaped, curtains frame the windows, but only at night can you tell that the apartments are empty.
A ghost city is a metropolitan area that has been abandoned due to various reasons such as economic decline, natural disasters, or government decisions.
These cities often have modern infrastructure and amenities but lack inhabitants.
According to a 2020 report, China has over 50 million vacant homes, with some cities having as much as 70% of their housing stock uninhabited.
The phenomenon is also seen in other countries like the United States, where abandoned cities are a result of urban decay and suburbanization.
Aging Population and Job Insecurity
The government pension fund could run out of money by 2035. Over the next decade, about 300 million people, who are currently aged 50 to 60, will leave the Chinese workforce. There are also fears about whether their sons, daughters and grandchildren can get a job as millions of college graduates struggle to find work.
More than one in five people between the ages of 16 and 24 in urban areas are jobless in China. The government has not released youth unemployment figures since August 2023. This is a problem that cannot be simply fixed by increasing domestic spending, according to Prof Nie Huihua at Renmin University.
A Catalyst for Change
Despite the challenges, Xi Jinping sees an opportunity in the crisis. He knows that Chinese manufacturers are at a decades-long advantage, and US manufacturers are struggling to find the same scale of infrastructure and skilled labour elsewhere.
‘In the short term, some Chinese exporters will be greatly impacted,’ says Prof Zhang. ‘But Chinese companies will take the initiative to adjust the destination of exports to overcome difficulties.’ Xi Jinping is trying to use this crisis as a catalyst for further change and to find more new markets for China.
Geopolitical Gains
As Trump targets both friend and foe, some believe that Xi Jinping can further upend the current US-led world order and portray his country as a stable, alternative global trade partner and leader. The Chinese leader has chosen South East Asia for his first trip abroad after the tariff announcement, sensing his neighbours would be getting jittery about Trump‘s tariffs.
Around a quarter of Chinese exports are now manufactured or shipped through a second country including Vietnam and Cambodia. Recent US actions may also present a chance for Xi Jinping to positively shape China’s role in the world.
- bbc.com | Xis real test is not Trumps trade war
