Jonathan A. Czin
Xi, China’s economy, and the three “Ds”
For much of President Xi Jinping’s third term, he and his coterie of advisors have struggled to cope with the three “Ds” afflicting China’s economy: debt, deflation, and demography. The prevailing diagnosis of China’s economic malaise tends toward the same prescription—namely, an expansive fiscal stimulus designed to enhance consumption as a driver of GDP growth and alleviate the pain caused by the collapse of China’s real estate sector.
Yet, Xi’s policies thus far have been criticized for being too austere and doing too little—and sometimes too late—to stimulate China’s sagging economic numbers. It is worth asking why Xi has been reluctant to change course. This month’s National People’s Congress (NPC) marks the halfway point in Xi’s third five-year term as general secretary, which began in October 2022, and is, therefore, a natural point at which to answer this question, particularly as the second trade war with the United States intensifies.
Prologue to the problem
Throughout Xi’s third term, many analysts of China’s economy seem to have gone through a boom-and-bust cycle of inflated and then disappointed expectations. The story starts with China’s abrupt exit from its “zero-COVID” policy in late 2022—just after Xi started his third term as general secretary. Following that dramatic policy shift, many observers—especially in the business community—wrongly assessed that China’s economic trajectory would follow a roughly V-shaped trajectory similar to the United States and other Western economies as they recovered from the pandemic. These analysts believed that the initial rollback of the pandemic control measures would lead to a short-term spike in disease and death, but that then China’s economy would come roaring back—perhaps abetted by government stimulus.
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