China: steadily marching towards crisis

As the world reels between escalating wars and economic stagnation, the Chinese masses are also suffering from the consequences of these developments.

Far from living in a safe haven from the world of instability that the all-powerful Xi Jinping regime promises, the Chinese working class are finding their standards of living hitting a brick wall alongside the nation’s economy.

The situation is not one of ‘steady improvement’ (稳中向好), a slogan now littering the official propaganda. Rather, the country is moving towards a critical point at which the status quo will unravel.

Steady downturn

It has been two years since the 20th Party Congress of the CCP, when Xi Jinping concentrated an unprecedented level of power in his hands, second only to Mao Zedong himself. In this process, Xi also took direct charge of economic policy by reorganising the State Council and installing his lackey Li Qiang in the position of Premier, so that all decisions on the economy fall under the Party i.e. Xi's direct oversight.

As Marxists explained many times before, these measures are fundamentally driven by the dictatorial state’s desire to rein in the market economy, ridding it of all its contradictions through state interventions, so as to achieve a capitalist economy that can avoid crises and the consequence that threatens the CCP the most: class struggle.

Has this worked as they wished?

In the past years, China’s GDP growth has hovered above the 5 percent target that the state set as a line to defend. At the end of 2023, growth rate fell right on the dot at 5 percent according to the state. This year, quarter to quarter growth so far appears sluggish, but some optimists like the IMF believe China can hold the line by the end of 2024, while pessimists like the China-born economist Ting Lu of Nomura Bank forecast a growth rate of 4.5 percent. Both, however, predict that by 2025 China’s growth rate will go below 5 percent.

This would not seem so bad in comparison to the abysmal growth rates of western countries. However behind this figure is a drastically changing economic dynamic.

The real estate sector crisis that has marred China’s economy since the fall of Evergrande in 2021 has not gone away / Image: Dinkun Chen, Wikimedia Commons

The real estate sector crisis that has marred China’s economy since the fall of Evergrande in 2021 has not gone away. A report by Tianfeng Securities quoted by Caixin shows that a majority of real estate companies are still showing losses, with 113 publicly-traded enterprises having seen their combined operating net cash flow shrink by 188.5 billion RMB (or $26.8 billion USD) in the first half of this year. The outlook for the real estate sector remains gloomy despite the state introducing major relaxations in regulations in May, as well as programmes for regional state owned enterprises to directly purchase unsold housing units for future resale.

The situation is so dire that the IMF actually suggested the CCP should launch a more than $1 trillion USD package to rescue the real estate sector, which was rejected by the ‘communists’ of the CCP because they insist on a ‘market-based’ approach to resolve the problem.

At the same time, manufacturing output continues to slow down, while consumption also remains low and declining. Despite massive subsidies being poured into the economy by the state, particularly into the high tech sectors, there is a growing crisis of overcapacity, which is leading to more news of bankruptcies every day.

Against the backdrop of a gloomy economic outlook, an enormous mood of anxiety is permeating the stock market. In February, a stock market crash left the Shanghai Composite Index at a five-year low. After a few months of recovery, the market sank to the same low in mid-September. The poor economic outlook along with growing tensions with the US led to a decline in foreign investments, despite the Party’s effort to woo them back through loosening of restrictions.

The downward pressure in the economy is also fueling the already high debt, a significant amount of which is held by regional and local governments. Official sources are evasive about the latest extent of the regional debts, which is causing widespread concerns, but in July, an S&P Global report remarked that “at least Chinese RMB 1 trillion (or 142 billion USD) in bonds alone will mature in each of the next couple of quarters; and bonds just represent no more than 20% of our estimated LGFV total outstanding debt.” Against this dire pressure, the state ramped up issuance of bonds.

At the time of writing, the CCP state has managed to keep the economic downturn from tobogganing into a collapse, but the downturn continues unabated.

Moreover, so far we’ve only accounted for near-term problems in China’s domestic economy. The enormous instability in the world’s economy, which remains decisive for China, looms large, and western tariffs against China are limiting the latter’s ability to ease its crisis of overproduction via export. The possibility for a general slump in the next period cannot therefore be ruled out.

The masses bearing the costs

But even if the economy is not seeing a sharp slump, the Chinese masses are already feeling a drastic crisis in their everyday lives. In one way or another, the ruling class is already making the workers pay the bill for their crisis.

The Chinese masses are already feeling a drastic crisis in their everyday lives / Image: G.Tech Technology Factory Zhuhai China, Wikimedia Commons

The most direct expression of this is the widespread phenomenon of struggles against wage arrears. To be sure, greedy bosses failing to pay their workers is hardly unusual in China since the restoration of capitalism, but in recent times a significantly larger number of wage arrears cases have emerged from struggling companies that are unable to pay.

Another layer seriously impacted by these developments are the youth. Official figures in August claim that unemployment for people between the age of 16 and 24 is at 18.8 percent, the highest in two years, while for those between 25 and 29 it is at 6.9 percent. However, these official figures are widely considered dubious, because the state announced a change in statistical methodology after official youth unemployment reached over 21 percent last June. The real figure is likely significantly higher.

Social media posts of young people complaining about unemployment are ubiquitous, whether it is from the youths themselves, or from parents lamenting their “unfinished kids” (烂尾娃) (comparing their children to halted real estate projects, which are also on the rise in China). Public libraries are packed with unemployed youths either looking for jobs or pretending to be at work so as not to worry their families.

But another quantifiable index that shows the desperation of the youths is the number of those applying for civil service exams, as working for the state is perceived as a more stable alternative to the private sector if they were able to pass difficult exams and edge others out. Applications for the civil service exams this year numbered more than 3 million, a sharp rise from last year’s 2.6 million, pitting on average 77 people against each other for one job position.

Against this backdrop of tension and discontent, when the state announced the plan to raise the retirement age in September, enormous anger broke out on the internet. Older workers fear that the pensions they toiled for over years are slipping away, while the youth interpret this as a reduction in job vacancies in the future. But as China is also facing a severe ageing population crisis that threatens to leave the state pension fund empty by 2035, austerity has become the only way forward on this front, and the masses will not be happy with it.

Discontent from below

The growing mood of anger from below is ever more palpable, which expresses itself through angry discussions in person and online about the social situation and scandals, and through direct action.

In just August, three notable scandals drew particular attention. One was the discovery of a massive network of illegal, for-profit surrogacy in Qingdao, Shandong. In response, many voiced their outrage that nowadays, young Chinese women in particular are forced to offer their bodies up to all sorts of potentially mutilating procedures to earn enough money to live.

Another horrific case was that of the discovery of a young woman who had died of starvation, alone in her apartment, after being chronically unemployed and likely descended into deep mental distress, a fate to which many other young people have come close.

Finally, there was the discovery that thousands of corpses were covertly being resold by funeral homes to others for profit.

All of these news items generated furious outcries on the internet, showing that, from the cradle to the grave, an ordinary Chinese’s person cannot escape the exploitation and oppression of capitalism.

But an even more militant minority are now translating their fury into deeds. Here, the workers are in the lead in their struggle against wage arrears. China Labour Bulletin records 989 protests or strikes so far this year, although other outlets such as @YesterdayBigcat and @whyyoutouzhele have released user-submitted videos showing strikes or other actions that are often not recorded by CLB, many involving hundreds of workers.

The strike action covers workers from all kinds of sectors, from BYD car plant workers in Wuxi, Jiangsu; toy factory workers in Rongxian, Guangxi; electronic part makers in Wuhan, Hubei; to sanitation workers in Inner Mongolia. These are but a small sample of what this year has brought so far. All of them are struggles against wage arrears.

In addition to workers’ struggles, there have been countless episodes of rural village populations mounting intense battles against forced land appropriations, demolitions and evictions, as regional governments become desperate for more land to sell and bolster their income. A particularly intense episode occurred in Jinan, Shandong, where villagers used fireworks and Molotov cocktails to repel the police sent to escort the demolition team.

There have also been multiple cases of school students mounting protests and at times riots against profit-seeking scams on the part of school management that deprive them of the students’ fees and rights. In July, a trade school in Guiyang, Guizhou issued acceptance letters to 3,000 students, only for the students to find out that they in fact only take 600 new entrants, while the rest were registered under other schools that the students didn’t apply to, seemingly in order to scam the students of their application fees. In response, over 2,000 students protested at the school and smashed up its library.

In many similar cases, not only the students, but their parents also joined in the struggles against education scams. In Henan Kaifeng, Shaanxi Yan'an, Hebei Chengde and Guangzong, Guangdong Huizhou and Shenzhen, and Jiangxi Fuzhou, there have been cases of schools or governments sacrificing the interests of students for profit, forcing parents to take collective action. Schools and local governments either redraw school districts, manipulate admission rules, or deploy other means to prevent students from attending school or rendering it unaffordable.

There are many more issues that cannot be counted within the confines of this article which have led to the eruption of collective action and furious struggles. But the foregoing should make the situation clear: that as Chinese capitalism descends deeper into crisis and the masses are squeezed, so the masses themselves are being increasingly forced to stand up and fight back.

The meaning of Xi Jinping’s massive stimulus

In light of the massive crisis in the economy, many hoped that this summer’s Third Plenum of the CCP Central Committee, traditionally an occasion for the regime to announce their economic policies, would see the regime take action to remedy the impending crisis.

The capitalists hoped for some kind of bailout measures, while the masses were yearning for relief programmes. Both were sorely disappointed, as what the Party produced was mostly a repetition of their previous policies of long-term investments in high-tech sectors and little more. Stocks plummeted at the time as investors interpreted this as a paucity of ideas on the CCP’s part for dealing with the problems right in front of them.

Xi Jinping himself had to finally come clean after months of pretending that the economy is doing fine / Image: UN Geneva, Flickr

At the end of September, however, the regime’s apparently timid approach suddenly ended. They tried to directly prop up the market by announcing massive fiscal stimulus measures. The People’s Bank of China presented the financial market with a 1 trillion RMB ($142Billion USD) pool for finance capital to lend from, as well as cutting rates to make loans cheaper. It also announced another $142 Billion USD worth of bonds, issued to fund subsidies for programmes boosting consumptions, such as allowances for families with more than two children.

The market rejoiced at this news. Chinese and Hong Kong stocks saw their highest rises in decades. This is not surprising, given that the state is showering finance capital with even more cheap credits to speculate with.

Significantly, Xi Jinping himself had to finally come clean after months of pretending that the economy is doing fine. An announcement by the Politburo Standing Committee, chaired by Xi himself, states that they must “face up to difficulties (in the economy) holistically, objectively and with a coolhead.”

This bureaucratic language seems mild, but the sheer admission that there are difficulties is a marked departure from the sloganeering about how China is on a “steady march towards improvement.”

The massive stimulus may have buoyed the mood in the economy for now, but what this ‘fiscal bazooka’ really does is to inflate the bubble in the economy via a large expansion of credit, and by extension, debt.

To be sure, credit has been expanding uncontrollably since 2008, when the CCP under Hu Jintao introduced similar measures to weather the shock of the global economic crisis. In recent years, Xi Jinping attempted to stop this, above all by deflating the bubble in the real estate sector via some regulations on leverage, but this in turn blew up in their faces, as we saw with the fall of Evergrande. Instead of preventing a crisis, it has pushed the whole real estate sector into a slump that is proving far larger than they imagined. This in turn has dragged down the whole economy into the present mire. In the face of this, Xi had no choice but to blink.

But, as we have seen all over the world, such measures are not going to restore the previous age of seemingly unstoppable growth of the economy and of people’s living conditions. It cannot resolve the massive and fundamental crisis of overproduction in the economy. Any stabilising effect these measures may have now will prove to be the source of further crises of debt in the future. The regime will thus be forced to take measures that further place the burden on the working class. Class struggle will not be abated, but will intensify.

As we are seeing the world over, China is seeing stability unravel, despite all the efforts of the Bonapartist CCP regime to the contrary.