Government policy towards its ageing population has undergone significant changes in the last three decades. Starting from the 1990s, the central government largely viewed population ageing as a social issue and introduced such policies as mandatory pension system and accessible aged-care services. Following the slowdown in the Chinese economy since COVID-19, the central government started to view population ageing through the lens of economic development. While older people can be important contributors to society and the economy, this article shows that treating them only as consumers overlooks other potential and fails to address some important challenges presented by the ageing population.

Social policy changes towards elder care

In 1991, the State Council released its ‘Decision Regarding Reform of the Basic Pension Insurance System for Enterprise Employees’ 国务院关于企业职工基本养老保险制度改革的决定 and initiated a pension system, which encouraged individuals and their employers to contribute to pension provident funds.^[3] To this day, the system is still being modified to reduce regional discrepancies and to enhance equity between rural and urban areas and to allow for easier transfer of pension accounts between regions. Operating on a pay-as-you-go social insurance model, the pension system works on the assumption that the current working-age population will finance the pensions of the elderly.^[4] However, having a rapidly ageing population means that a shrinking proportion of younger workers are responsible for funding the pensions of a growing proportion of retired people. If no corrective action is taken, the pension system will eventually collapse.^[5]

Pensions alone cannot answer all the needs of the elderly in the absence of accessible aged-care services such as affordable nursing homes or domestic assistance. In 2000, private aged-care providers, which emerged in the late 1990s, were incentivised to work with district and street-level governments and community authorities 居委会 to expand the capacity of aged-care services. As demand continued to grow, the central government decided to allow the market to pay a bigger role. In 2016, the General Office of the State Council published a document titled ‘Several Suggestions on Fully Liberalising the Elderly Care Service Market and Improving the Quality of Elderly Care Services’ 关于全面放开养老服务市场提升养老服务质量的若干意见.^[6] As a result of this policy, the private market for aged care thrived. However, private providers tend to focus on high-end users, and costs are often prohibitive for ordinary pensioners. Moreover, private providers proved more interested in providing services primarily for the healthy elderly.^[7]

Some promising market solutions did emerge. Due to the restrictions on official spending imposed by ‘Eight Central Regulations’ 中央八项规定 in 2012,^[8] the hospitality sector, such as spas, hotels or restaurants, built during China’s fast economic growth era, became sluggish. Many buildings were left unused, mostly in peri-urban areas. Business owners were reluctant to give up and hoped that the restrictive policy could be relaxed soon and the market would revive.^[9] As they were waiting, some business owners started to notice that the shortage of pensioners’ homes could be their new business opportunities and started to convert their business venues to aged-care facilities or age-friendly properties. In this way, they can earn rent or service fees.^[10] With no signs of relaxing restrictions on official consumption, city governments, such as Nanjing and Beijing, began to implement favourable policies, including land tenure, business licensing or direct subsidies to support the conversion of unused buildings (such as factory buildings, community service rooms, urban hostels and rural collective land and facilities) into aged-care facilities or age-friendly homes.^[11] Due to this policy support, care home operators in renovated facilities are able to charge less than those in newly built care homes so their homes therefore more affordable.^[12] However, due to the COVID-19 outbreak, older individuals have become reluctant to reside in care homes. A 2020 survey by the Ministry of Civil Affairs showed that around 50 percent of the 4.29 million beds in aged-care homes were empty.^[13]

Even with affordable agedcare institutions and the passing of the worst of the pandemic, most older people prefer to live independently at home. This means there need to be such services as basic health checks, food delivery or assistance in domestic chores that the elderly can access conveniently near their own home. In the 1990s, the central government began to experiment with the idea of ‘community building’ 社区建设 : making residential communities a centre for service delivery and mutual support. It was a shift from employer-provision (also known as work unit provision单位提供) instituted during the central planning era. With services provided in urban communities, older people’s needs can be addressed through socialised services delivered by private providers or NGOs. Since its inception, the service provision system has been restructured several times. The newest official target is for 97 percent of seniors (defined as 60 or older) to receive basic support and primary healthcare at home and/or in the residential community they live in, while the remaining 3 percent, who were unable to live independently, could live in private aged-care institutions.

This system faces two challenges: the lack of guaranteed consistent funding support and a qualified workforce. To support the funding of care services, a long-term care insurance system was introduced in 2016 with 15 cities as pilots, and 49 cities currently participate in pilot programs.^[14] To increase labour supply, a professional standard for aged-care workers was introduced in 2019, and many city authorities set up geriatric nursing schools to train more aged-care workers.^[15]

Government to the elderly: wallets over work

In 2024, the Chinese government formally announced the policy ‘Opinions on Developing the Silver Economy to Enhance the Well-being of the Elderly’ 关于发展银发经济增进老年人福祉的意见. A decade ago, the government had begun piloting ‘silver economy’ programs in cities including Shanghai, Chengdu, Hangzhou, Xiamen and Taicang while some other cities have taken the initiative to carry out such programs themselves.^[16] Now, more cities follow suit in response to the central government’s effort to address demographic and economic issues in the post COVID-19 era.^[17] This is a significant policy shift, from treating the ageing population primarily as a social issue to leveraging it as an economic driver.

This consumer-oriented approach is promising in several ways. First, some of the older population have good savings, and their strong consumption power can be used to spur economic growth. Second, it targets the specific needs of older people, thereby enhancing their quality of life, supporting their lifestyles and ultimately improving their well-being. An array of tailored services and products are included in the government’s plan: meal assistance (including community dining halls), home-based elder care and public health services (including home visits by community doctors to carry out regular health checks for chronic diseases such as senior health check-up, advices or referral services), community-based cultural and sports activities (with dedicated rooms and facilities). There are also services including day care centres and game rooms for the rural population. Third, meeting the needs of the older population has the potential to stimulate innovation in new products, services and entrepreneurship.^[18] This new plan will stimulate more private investment in the relevant industries and services.^[19]

The policy shifts indicate that the government values the wallets of older people more than their work. Continuous industrial upgrading over the decades of economic reform have made many of the skills of older employees obsolete.^[20] Second, China’s economy is struggling to absorb its labour force. Before the pandemic, it was hoped that the increasingly prosperous internet economy and international trade would drive employment.^[21] However, the economy has been struggling since the pandemic, with many small and medium-sized businesses closing due to a decline in trade.^[22] Meanwhile, the last statistics released on youth unemployment showed it at more than 20 percent, and there are ever more university graduates, with the number expected to exceed 11.79 million in 2024.^[23]

What does active ageing look like in China?

In China, the mandatory retirement age is unusually low: 60 for male and 55 for female in managerial positions; 60 for male and 50 female for manual workers; and 55 for male and 45 for female in heavy labour workers who have at least ten consecutive years of work experience.^[24] Early retirement has brought further challenges as the younger retired cohort want to be active and socially engaged. ‘Public square dancing’ 广场舞 in which participants – mostly women – dance to loud music in public squares and parks has been a popular phenomenon for years. There have been frequent conflicts between the dancers and local residents because of the noise and disruption to traffic, which working-age families fear could affect the value of their property.^[25] Some local governments have introduced regulations concerning the use of public spaces and noise levels. In the past two years, building more public sports facilities has been written into the annual Central Government Work Report 政府工作报告.^[26] According to the ‘National Fitness Facilities Improvement Action Plan (2023–2025)’ 全民健身场地设施提升行动工作方案 (2023–2025年), in community centres, parks and other public spaces where new fitness equipment is installed, the number of age-friendly fitness equipment (including those for older people and children) should not be less than 50 percent of all equipment. All public sports venues will provide fitness activity spaces for the elderly. Financially better-off areas can build and equip age-friendly fitness equipment and provide services such as Senior Exercise and Health Homes offering chronic disease exercise intervention, exercise health management and dissemination of health knowledge.

According to the China Association of the Universities for the Aged 中国老年大学协会, as of the end of 2019, there were approximately 76,000 Universities for the Aged in China (老年大学; like the University of the Third Age in Australia). About 10.9 million students enrolled, and more than 80 percent of the enrolled students were younger than 70, with half of the students aged 60 to 69. Pre-pandemic, the demand for such education was so high that vacancies were allocated by lottery. During pandemic, however, most of these universities curtailed their courses due to concerns about virus transmission. Post-lockdown, there was a lag in reopening the courses, so about 10 million older people could not go to the university as before. Online teaching started to enter the third age education sector, and the Online University for the Aged 网上老年大学 was founded and more than a thousand teachers and 700 universities across the country joined the platform.^[27] However, digital learning cannot replace face-to-face learning for the students as many of them participated in learning activities to avoid being socially inactive and overcome loneliness.^[28] These days, online services are upgraded to provide teaching materials and public lectures that can be attended by students across the country. By April 2023, there are more than 20 million students attending the University of the Aged. About 40 percent of older people participated in learning activities, both online and offline. The university system has developed into a five-level educational network consisting of provinces, cities, counties, townships (streets) and villages (communities).^[29]

Seniors themselves, without official support, have formed groups for social outings, consumer activities and travel. According to a report released by the China Tourism Academy in July 2023, 67.50 million older people travelled for tourism in 2020. Seniors (aged 65 and above) residing in urban areas on average spent CNY1209.2 (US$167) per trip while their rural counterparts spent CNY847.5 (US$117). The report further showed that older people expressed dissatisfaction with the traditional senior tourism market, which offered only a narrow range of products and experiences. They longed for a more culturally enriching experience, emphasising personal growth and opportunities for social engagement.^[30] Given that the older population will continue to grow in numbers, there may be a higher proportion of older people travelling and, with higher costs for the more desirable tourist experiences, the report estimated that by the end of 2025, the revenues of domestic senior tourism could reach 1.14 trillion yuan (US$160 billion).^[31]

It may be easy to infer that China’s seniors have responded positively to ‘silver economy’ policies that support active ageing. The reality is less straightforward.

Elderly to government: I want to contribute, but not on your terms

Since 2012, every time the central government proposed the idea of postponing the legal retirement age due to the sustainability of pension funds, the response was a strong backlash from the public on social media.^[32] Many internet-based surveys were conducted over the years, all of which found that the majority were against postponing retirement. In one survey, some 90 percent rejected the idea.^[33]

An obvious concern is that working extra years means people have to contribute to the pension fund for a longer period and enjoy a shorter retirement life. People have calculated that if the monthly pension amount that retirees receive does not change, they would ultimately pay more and receive less. A survey conducted by Economic Daily, a state-owned newspaper, showed that workers who endured years of low pay during China’s central planning era (1950–80) were particularly against delaying retirement age, having accepted reduced pay in return for a state-funded old age pension at the established age.^[34] In contrast, those employed by government departments and public institutions with better welfare coverage voted most favourably in postponing retirement.^[35] Currently, China’s retirement age is set uniformly across most occupations and all regions, offering no flexibility for individual circumstances. For instance, even though blue-collar workers find it harder to do manual labour after a certain age,^[36] the lack of reliable universal social protection for them after retirement means that many people, especially migrant workers, simply cannot afford to retire.^[37]

Given the mounting pressure of population ageing, in 2021, the central government introduced a gradual postponement plan with small-step adjustments; that is, delaying retirement by a few months each year.^[38] Despite the fact that it is an unavoidable change, the official expression of policy in this area, as in others, tends to focus on the economy or society rather than individuals. Telling people to work more years because the pension funds need more contributors to be sustainable sounds much like the discourse around shifting from the One-Child Policy to the Three-Child Policy. Women and employees are perceived as mere instruments for sustaining an ailing economy.

Beyond employment, older people contribute to society in other ways. Previously, in the One-Child Policy era, older people played an important role as caregivers, not just in the case of looking after migrant workers’ ‘left-behind children’ 留守儿童 but also where there is absence of affordable and good-quality childcare.^[39] In 2021, the government published ‘The Implementation Plan for the 14th Five-Year Plan: Ageing Population Project and Childcare Infrastructure Construction 十四五老龄化工程和托育建设实施方案 designed to ensure that families have access to affordable, high-quality childcare options that support the well-being and development of children.^[40] Following this policy, the number of registered childcare enterprises increased from 1892 in 2020 to 5561 in 2021 and then to 14,191 in 2022.^[41] These enterprises operated 75,000 childcare institutions offering services to 3.5 million children across the country.^[42] Such exponential growth in the availability of childcare facilities helped to ease pressure on middle-class families – and grandparents who otherwise were being asked to babysit as well.^[43]

During COVID-19, community volunteering activities, such as maintaining environmental hygiene, community patrolling, food sorting and delivery, have become more active in urban China, including among seniors.^[44] It was good for the mental health of residents, in particular for the seniors.^[45] The government saw this as an opportunity to push for greater civic engagement and supplement the shortage of care labour force.^[46] However, on the whole, Chinese seniors are not yet very active in volunteering, probably because of the traditional thinking that older people should receive care from others instead of giving care themselves. This mentality had been reported even before COVID-19.^[47] However, it has been observed that the younger senior cohort are more likely to participate in time-banking whereby they can accumulate credits for helping others.^[48] These credits can be used for buying goods and services. Obviously, this is not as altruistic as volunteering without compensation. But as long as older people could benefit from time-banking by leading an active life and supporting others in need, there is no reason why they have to engage with society out of pure altruism.

The Chinese government’s silver economy plan is meant to use one stone to hit several birds: meeting the specific needs of older people, propelling economic growth and boosting innovation in new products, services and entrepreneurship. It represents a step forward in recognising the importance of the ageing population not just as a social issue but also as an economic issue. However, the policy falls short of realising the full potential of this demographic. It focuses too much on the wallet rather than the human resources of older people, overlooking the rich tapestry of experience, wisdom and capability they offer. The way ahead is to recognise that the real value of the silver economy is not just in how much the elderly can spend but also what they can do. The challenge, however, lies in winning the trust of older people. Rather than making them all eat in community canteens, policy-makers should probably need first to ask people how they define a happy and constructive old age.

Notes

^[1] Xiuli Liu, Mun S. Ho, Geoffrey J.D. Hewings, Yuxing Dou, Shouyang Wang, Guangzhou Wang, Dabo Guan and Shantong Li, ‘Ageing population, balanced diet and China’s grain demand’, Nutrients, vol. 15, no. 13, 2023, p. 2877.

^[2] Rong Chen, Ping Xu, Peipei Song, Meifeng Wang and Jiangjiang He, ‘China has faster pace than Japan in population ageing in next 25 years’, Bioscience Trends, vol. 13, no. 4, 2019, pp. 287–91.

^[3] State Council, ‘The State Council’s decision on the reform of the basic pension insurance system for enterprise employees’ 国务院关于企业职工基本养老保险制度改革的决定, Guofa (1991), No. 33.

^[4] Hsuan-Chih Lin, Atsuko Tanaka and Po-Shyan Wu, ‘Shifting from pay-as-you-go to individual retirement accounts: A path to a sustainable pension system’, Journal of Macroeconomics, vol. 69, 2021, 103329.

^[5] Junqiang Han and Yingying Meng, ‘Decreased contribution rates increase public pension fund revenue: Evidence from China’, Journal of Ageing and Social Policy, vol. 33, no. 2, 2021, pp. 120–37.

^[6] General Office of the State Council, ‘Several suggestions on fully liberalising the elderly care service market and improving the quality of elderly care services’ 关于全面放开养老服务市场提升养老服务质量的若干意见, Guobanfa (2016), No. 91.

^[7] Bingqin Li, ‘Population ageing and community-based old age care supply in China’, in Housing and Ageing Policies in Chinese and Global Contexts: Trends, Development and Policy Issues, ed. Terence Shum and Charles Kwong, Singapore: Springer Nature Singapore, 2023, pp. 79–95.

^[8] Central Political Bureau of the Communist Party of China, ‘The eight regulations of the 18th Central Political Bureau on improving work style and strengthening contact with the masses’ (十八届中央政治局关于改进工作作风、密切联系群众的八项规定), December 2012, Central Government Portal, online at: https://www.gov.cn/xinwen/2014-11/02/content_2774141.htm

^[9] Lifei Huang and Fang Xiao, ‘Hunan and Hubei-themed restaurants suffer losses and rush to close down, while Hunan catering enterprises display various strategies to get through the winter’, China Daily, 18 July 2013, online at: http://finance.people.com.cn/n/2013/0722/c1004-22273248.html

^[10] Hui Cheng and Lipeng Lin, ‘Nursing homes, hard to find (Special Report: New growth points around us? Elderly care services)’, 26 January 2015, online at: http://finance.people.com.cn/n/2015/0126/c1004-26447022.html

^[11] General Office of the People’s Government of Nanjing, ‘Measures for the planning, construction and management of elderly care service facilities in nanjing (trial)’, online at: 南京市养老服务设施规划建设管理办法（试行）, [2017] No. 125.

^[12] Bingqin Li, ‘Creating a service system from scratch: Community old age care services in China’, Dilemmas in Public Management in Greater China and Australia, ed. Kaifeng Yang, John Wanna, Tsai-Tsu Su and Andrew Podger, ANU Press, Canberra, 2023, pp. 473–96.

^[13] Chenwei Du and Yue Wu, ‘Many vacant beds in nursing homes, will it trigger an industry wide reshuffle?’, Jiefang Daily, 26 June 2023, online at: https://www.cnr.cn/shanghai/shzx/zq/20230626/t20230626_526303043.shtml

^[14] Zhanlian Feng, Elena Glinskaya, Hongtu Chen, Sen Gong, Yue Qiu, Jianming Xu and Winnie Yip, ‘Long-term care system for older adults in China: Policy landscape, challenges and future prospects’, Lancet, vol. 396, no. 10259, 2020, pp. 1362–72.

^[15] Li Bingqin, Jiwei Qian and Sisi Yang, ‘The mindset: Tackling the challenges of old age care in communities in China’, China: An International Journal, vol. 19, no. 3, 2021, pp. 148–67.

^[16] Lijie Fang and Bingqin Li, ‘The entrepreneurial welfare mix: The case of community-based old age services in China’, Social Policy and Society, 2023, pp. 1–10, online at: doi:10.1017/S1474746423000234

^[17] General Office of State Council, ‘The State Council General Office’s opinion on developing the silver economy to enhance the well-being of the elderly’ 国务院办公厅关于展银发经济增进年人福祉的意见, Guobanfa (2024) No. 1.

^[18] Interesse G, ‘Unlocking China’s elderly market: Tapping into the power of the “silver economy”’, China Briefing, 3 July 2023, online at: https://www.china-briefing.com/news/unleashing-the-potential-of-chinas-silver-economy/

^[19] Chad De Guzman and Koh Ewe, ‘China unveils extensive “silver economy” plan to adapt to ageing population’, Time, 15 January 2024, online at: https://time.com/55949/china-silver-economy-ageing-population-plan/

^[20] Bo Liu, ‘Age discrimination in Chinese internet workplace’, Journal of Education, Humanities and Social Sciences, vol. 27, 2024, pp. 172–80. Huiping Zhang, ‘Workplace victimization and discrimination in China: A nationwide survey’, Journal of Interpersonal Violence, vol. 36, no. 1–2, 2021, pp. 957–75.

^[21] Edmund Li Sheng, A Tale of Three Cities: Urban Governance of Shanghai, Hong Kong and Singapore During COVID-19, Singapore: Springer Nature Singapore, 2024, pp. 69–87.

^[22] Cheng Huang, Gordon G. Liu and Zhejin Zhao, ‘Coming out of the pandemic: What have we learned and what should we learn?’, China Economic Review, vol. 79, 2023: 101934.

^[23] State Council Information Office PRC, ‘China to have 11.79m university graduates in 2024’, Xinhua News Agency, 6 December 2024, online at: http://english.scio.gov.cn/m/pressroom/2023-12/06/content_116861005.htm.

^[24] John Giles, Xiaoyan Lei, Gewei Wang, Yafeng Wang and Yaohui Zhao, ‘One country, two systems: Evidence on retirement patterns in China’, Journal of Pension Economics and Finance, vol. 22, no. 2, 2023, pp. 188–210.

^[25] Yue Xiao, Eddie C.M. Hui and Haizhen Wen, ‘The housing market impacts of human activities in public spaces: The case of the square dancing’, Urban Forestry and Urban Greening, vol. 54, 2020: 126769.

^[26] State Council, ‘Report on the Work of the Government 2024’ 年政府工作报告, 14 March 2024, online at: http://www.china.org.cn/chinese/2024-03/14/content_117057714.htm.

^[27] Wangshang Laonian Daxue, 网上老年大学, ‘About us’, 2024, online at: https://www.wslndx.cn/aboutus.html.

^[28] Yuruo Lei, Jie Lao and Jiawei Liu, ‘Participation in community seniors’ organizations and mental health among retired adults in urban China: The mediating role of interpersonal needs’, Frontiers in Public Health, vol. 10, 2022: 1045948.

^[29] Insight and Info, ‘Analysis of the current development status and investment prospects of China’s Elderly Education Industry Report (2023–2030)’, 中国老年教育行业发展现状分析与投资前景研究报告(2023–2030年), 2023, online at: https://www.chinabaogao.com/baogao/202311/675605.html.

^[30] Keju Wang, ‘Great potential seen in senior tourism market’, China Daily, 8 February 2024, online at: https://govt.chinadaily.com.cn/s/202402/08/WS65c433bb498ed2d7b7ea7814/great-potential-seen-in-senior-tourism-market.html#:~:text=In%20a%20bid%20to%20further,inclusive%20environment%20for%20older%20adults.

^[31] Jing Zhang, ‘China’s report on the development of elderly health and wellness tourism: The demand for elderly tourism continues to increase and upgrade’, 4 July 2023, online at: https://www.mct.gov.cn/gtb/index.jsp?url=https%3A%2F%2Fwww.mct.gov.cn%2Fwhzx%2Fzsdw%2Fzglyyjy%2F202307%2Ft20230704_945588.html

^[32] Joy Dong, ‘A greying China may have to put off retirement: Workers aren’t happy’, New York Times, 27 April 2021, online at: https://cn.nytimes.com/china/20210427/china-retirement-aging/-nytimeschinese/

^[33] Nan Xiang, ‘Survey of 10,000 people: 94.5% of respondents oppose delaying retirement’, 29 August 2013, online at: China Youth Daily, http://politics.people.com.cn/n/2013/0829/c1001-22729079.html

^[34] Li Bingqin, ‘Social pension unification in an urbanising China: Paths and constraints’, Public Administration and Development, vol. 34, no. 4, 2014, pp. 281–93.

^[35] Lijuan Wang and Jingjing Wang, ‘Media survey: How to balance the interests of all parties in the steady implementation of delayed retirement’, 29 March 2021, online at: https://www.thepaper.cn/newsDetail_forward_11939262

^[36] Marina Schmitz, ‘Change in China? Taking stock of blue collars’ work values’, Journal of Chinese Human Resource Management, vol. 10, no. 1/2, 2019, pp. 49–68.

^[37] Vaishali Singh, ‘Ageing society and labour policy in China: Analysing policy challenges and options’, Chinese Studies, vol. 7, no. 3, 2018, pp. 242–50.

^[38] Ministry of Human Resources and Social Security of PRC, ‘The Five-Year Plan for the Development of Human Resources and Social Security Affairs’, 人力资源和社会保障事业发展’十四五’规划’, 30 June 2021, online at: https://www.gov.cn/zhengce/zhengceku/2021-06/30/content_5621671.htm

^[39] Yantao Ling, Zhe Song, Yang Yu and Tangyang Jiang, ‘Dealing with an ageing China – Delaying retirement or the second child policy?’, Plos one 16, no. 1, 2021: e0242252.

^[40] National Development and Reform Commission, Ministry of Civil Affairs, National Health Commission, ‘14th Five-Year Plan for Actively Responding to the Aging Population Project and Childcare Construction Implementation Scheme’ 十四五’ 积极应对人口老龄化工程和托育建设实施方案, 17 June 2021, NDRC Social [2021] No. 895 (updated 11 March 2024), https://www.sohu.com/a/769965819_121124337.

^[41] National Health Commission Childcare Institution Information Public Disclosure Platform, ‘National Childcare Institutions Filing Data Observation Report (As of July 31, 2023)’, 全国托育机构备案数据观察报告（截至2023年7月31日) 7 August 2023, online at: https://baijiahao.baidu.com/s?id=1773539293895409363.

^[42] Yanfan Yang, ‘Inclusive childcare, supporting a happy childhood (big data observation)’ 普惠托育，托举幸福童年(大数据观察), People’s Daily, 31 May 2023, online at: https://www.gov.cn/yaowen/liebiao/202305/content_6883878.htm

^[43] Xiaohui Zhong and Minggang Peng, ‘The grandmothers’ farewell to childcare provision under China’s two-child policy: Evidence from Guangzhou middle-class families’, Social Inclusion, vol. 8, no. 2, 2020, pp. 36–46.

^[44] Lin Chen, Minzhi Ye and Yilin Wu, ‘Shaping identity: Older adults’ perceived community volunteering experiences in Shanghai’, Nonprofit and Voluntary Sector Quarterly, vol. 49, no. 6, 2020, pp. 1259–75.

^[45] Wai Chan, Cheryl Hiu Kwan Chui, Johnson Chun Sing Cheung, Terry Yat Sang Lum and Shiyu Lu, ‘Associations between volunteering and mental health during COVID-19 among Chinese older adults’, Journal of Gerontological Social Work, vol. 64, no. 6, 2021, pp. 599–612.

^[46] Peizhi Li, ‘Promoting the high-quality development of volunteer services’ 推动志愿服务事业高质量发展, Guangming Daily, 17 January 2022, online at: https://epaper.gmw.cn/gmrb/html/2022-01/17/nw.D110000gmrb_20220117_2-06.htm

^[47] Hua-lei Yang, Shuo Zhang, Wen-chao Zhang et al., ‘Volunteer service and well-being of older people in China’, Frontiers in Public Health, vol. 10, 2022: 777178.

^[48] Shiyu Lu, Cheryl Chui and Terry Lum, ‘Facilitating volunteer engagement among older adults in social services: A case study of an innovative timebank program in a Chinese society’, Gerontologist, vol. 64, no. 1, 2024: gnad010.

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In Latin America and the Caribbean (LAC), something started to change around 10 years ago. After a 10-year span marked by surging Chinese investments in the region’s natural resource sectors – financed by the ‘Going Out’ policy, which offered soft loans for Chinese corporations to acquire new projects – the landscape of Chinese economic engagement evolved to include infrastructure development. Even as early as 2005, the China Ex-Im Bank and the China Development Bank had been actively involved in the region, extending loans to sovereign nations for diverse projects. However, the emphasis on infrastructure became particularly pronounced in the aftermath of the Global Financial Crisis. In response to the global economic downturn, the Chinese government pumped money into domestic infrastructure projects, which sustained robust economic growth amid the crisis. These were the infamous three years (2011–13) when China consumed more concrete than the United States had done throughout the entire twentieth century. Soon, China’s construction capacity began to outstrip domestic demand, prompting a global quest for new profitable markets for Chinese contractors. This would mark the beginning of a new chapter in China–LAC relations, in which loans for infrastructure projects executed by Chinese firms became a cornerstone of the trans-Pacific connection, particularly within LAC countries with strained relations with Western-based international financial institutions. Chinese contractors also made inroads into some LAC countries through open bids for public works that have not involved government-to-government agreements or financial backing from Chinese policy banks. Although some analysts like to set the start of this era in a speech by Xi Jinping in Kazakhstan in 2013, where he officially announced the BRI, the underlying currents of change had been set into motion much earlier.

Over the period from 2008 to 2019, China’s development finance rivalled the global lending capacity of the World Bank, with both entities nearing the half-trillion-dollar mark for lending. In Latin America, the volume of Chinese loans in some years surpassed the combined lending of the World Bank, the Inter-American Development Bank and the US Export-Import Bank, although not all these loans were allocated to infrastructural projects. The distribution of both the number and the volume of loans across the region exhibits disparities. Such countries as Venezuela, Brazil, Ecuador and Argentina emerged as primary recipients of Chinese financial support, whereas others such as Jamaica and Trinidad and Tobago have also secured considerable loans in proportion to the scale of their economy. In contrast, Chile, Peru and Colombia remain notably absent from the roster of nations with sizeable debts to China, although Chinese contractors have successfully secured bids for significant public works in these countries, such as the Bogotá metro project in Colombia. By 2023, 21 LAC countries had become signatories of BRI, although formal membership does not correlate with eligibility for funding. Many of these countries were already beneficiaries of loans from Chinese policy banks before joining the BRI. Furthermore, several LAC countries that have not yet formalised their BRI membership are recipients of Chinese infrastructural loans. Indeed, some researchers have contended that the BRI in LAC represents a ‘repackaging of existing relations’ and economic trends set in motion by the Global Financial Crisis.[3] In this context, it is more useful to conceptualise the BRI as a distinct economic moment in China’s developmental trajectory, marked by overaccumulation and the global expansion of Chinese construction firms. Through this lens, a clearer depiction of the developmental impact of the BRI in LAC begins to take shape.

Now often taken for granted, one of the crucial ways in which Chinese development finance reshaped the political landscape of development in LAC was by introducing an (optional) end to unilateral conditionality. For decades, at least since the debt crisis of the early 1980s, the region had been subject to structural adjustment programs as a condition for financing. Certain aspects of conditionality might have yielded benefits – others clearly did not, as illustrated by the World Bank’s acknowledgement that the 1980s were a ‘lost decade of development’.[4] A fundamental critique has focused on the undemocratic nature of structural adjustment. Sovereign nations were forced into liberalisation trajectories that in occasions diverged from their electoral mandates. In this context, the absence of political conditionality in Chinese developmental finance, whether BRI-branded or not, was welcomed by those critical of the US-centric global development system. But it is important to note that even though Chinese loans did not come with political conditions such as liberalisation and governance reforms, Chinese loans often came with particularly stringent commercial conditions designed to ensure repayment, and this represented a departure from typical contracts in the development industry.[5] Nevertheless, China’s emergence as a major lender has afforded LAC countries additional options to finance their development agendas, consequently providing them with more political leverage to reimagine development beyond the conventional template provided by Washington-based institutions – even if some might have found themselves ‘doubly trapped’ between two mighty lenders.

By focusing on infrastructure, the Belt and Road Initiative has addressed a regional gap that the World Bank estimated to necessitate investments equivalent to 6.2 percent of annual GDP.[6] But by lending to this sector the BRI has waded into turbid waters. Across LAC countries, major infrastructure works have been a source of contention and conflict as land use changes and authoritarian approaches to implementation have threatened sustainability and community rights.[7] In this regard, evaluating individual BRI projects requires a consideration of their economic and social returns, alongside an assessment of socioenvironmental costs. Economic dividends are relatively straightforward to measure. In essence, some BRI projects have acted as economic multipliers, generating sufficient economic activity eventually to offset the initial investment. Examples include the expansion of airports in tourism-dependent countries like Antigua and Barbuda, the financing of a national broadband network in Suriname, and investments in road and railway construction and repair in places like Bolivia and Argentina. However, some projects fall short of meeting this multiplier criterion. Examples include ‘white elephants’ like the Montego Bay Convention Centre in Jamaica or, more broadly, underutilised infrastructure such as the North-South highway in Jamaica, which has high toll prices that have deterred many Jamaicans from using it.

There are examples of Chinese-funded projects that might have not been intended as economic multipliers but which have added social value. Examples include construction of hospitals and healthcare facilities in Ecuador and Trinidad and Tobago. Similarly, the construction of convention centres or cricket stadiums has often been criticised as a wasteful enterprise in the developing world – but some might wish to challenge the notion that sport and cultural facilities should remain a luxury exclusive to the developed world while the poor should focus on productivity. Nevertheless, not all these initiatives have yielded the anticipated outcomes. For example, the Couva Hospital in Trinidad and Tobago fell short of its envisaged role as a children’s hospital, owing both to structural limitations and to neglect of capacity-related challenges.[8] The proposed construction of a new stadium in El Salvador has also garnered attention, raising questions about scale (if built it will be the largest stadium in Central America) while also triggering geopolitical anxieties in Washington – a matter that arguably diverges from developmental considerations.

Related to the above, concerns have also emerged regarding the processes through which BRI projects have been implemented. A salient feature of projects financed by Chinese policy banks is their limited participatory element. The development of the National Academy for the Performing Arts in Trinidad, for instance, faced criticism from local artists who lamented the lack of consultation regarding the needs of the local artist community.[9] In a broader perspective, the construction sector both in the region and beyond has developed a dubious reputation on issues of corruption and accountability. Brazilian and Spanish contractors, for example, have established a low standard in LAC. Chinese enterprises in this sector, too, have faced their share of scandals in such countries as Guyana or Peru. In doing so, they stand on the shoulders of the giants that preceded them, rather than representing isolated anomalies. However, Chinese development finance for infrastructural works stands out for its poor record on issues of transparency, participatory approaches, and consultation. Chinese policy banks typically confine their interactions to central government authorities, thereby distinguishing themselves from such organisations as the World Bank, which, in recent decades, has endeavoured to foster participatory approaches and transparency standards, although not without controversy over whether these initiatives genuinely aim to empower local populations or merely to co-opt them.

Chinese infrastructure projects have also, at times, the distinctive characteristic of relying on an imported Chinese labour force, although the degree to which this has happened varies across the region, with some countries placing severe limitations on the importation of labour. Central American and Caribbean governments have shown a higher propensity for accepting the influx of Chinese labour, a phenomenon less prevalent in South America. For Chinese contractors, the use of Chinese labour is an aspect that might be negotiable, with local authorities being presented with varying price tags depending on the percentage of local workers engaged in the construction process. Employing Chinese workers allows for a more economical and expedient delivery, thereby reducing costs for both parties involved. This efficiency stems from the greater ease with which Chinese contractors can exploit migrant labour.[10] Host countries find themselves at a crossroads, having to decide the extent to which Chinese infrastructure aims to generate local employment versus prioritising the swift and cost-effective delivery of projects.

Furthermore, a considerable number of BRI projects in Latin America and the Caribbean grapple with environmental challenges. Some fall into a grey area; for instance, the Coca Codo Sinclair hydroelectric dam in Ecuador has locally significant environmental impacts but could contribute to an overall reduction in carbon emissions. In contrast, others, like the Santa Cruz River Hydroelectric Complex, blend labour violations with inadequate environmental impact assessments that downplay the substantial damage they could inflict on local ecosystems.

While many debated the BRI’s merits and characteristics, few doubted it had become a cornerstone in LAC’s developmental landscape. As various Chinese-funded projects proliferated throughout the region, the prevailing belief was that the rise of China was unstoppable, inevitable and exponential, and that China seemed destined to challenge US regional hegemony. However, by 2018, a shift had begun. Reports from the Dialogue and Boston University’s Global Development Policy Center highlighted a substantial reduction in Chinese loans to the region. Having consistently surpassed the US$5 billion mark annually since 2009, the figure plummeted to US$2.1 billion in 2018 and US$1.1 billion in 2019.[11] This was not merely a hiccup but rather a new trend, consolidating in 2020 as the first year in which Chinese development banks issued no loans to the region. Subsequent years saw the total loan figures not reaching the US$1 billion mark per year.[12] This new normal coincided with increasing caution on the part of some of China’s borrowers. The Jamaican government, for instance, announced in 2019 that it would refrain from taking on more Chinese loans for the time being.

A decade since its inception, the BRI finds itself grappling with a midlife crisis. There is insecurity in a model that once inspired certainty, hesitance where success once appeared inevitable. Notably absent from recent Xi Jinping speeches, the BRI has seemingly been supplanted by less China-centric branding, such as the Global Development Initiative. In material terms, China confronts its first overseas debt crisis, renegotiating US$52 billion in loans in the 2020–21 period. This suggests significant miscalculations in China’s overseas development lending, especially in the case of Venezuela. At the same time, while Chinese loans have been rescaled, investments by individual firms not backed by policy banks continue unabated, many of them increasingly under public–private partnership frameworks.[13] This suggests that, at the very least, the BRI has served as a successful mechanism for the internationalisation of many Chinese state-owned and private firms, enabling them to operate with increased autonomy. Furthermore, the BRI has helped to generate a multitude of bilateral and multilateral agreements designed to facilitate new commercial activities in the years to come, including most recently a free-trade agreement with Ecuador, or a yuan-settlement deal with Brazil.

Over the past decade, the BRI has come to represent a significant moment in China’s development trajectory – one that is characterised by state support for the internationalisation of Chinese construction and engineering firms, of which China now has an oversupply. From the perspective of LAC countries, the BRI has reshaped the politics of development and bolstered the developmental agency of policy elites in the region. At the same time, from the vantage point of communities and activists across, the BRI has often reinforced existing developmental hierarchies and introduced new barriers for non-elite populations’ influence in national and local development projects. As the Chinese government recalibrates its commitment to the BRI in light of the successes and failures of the last decade, along with changing global geopolitics and domestic economic challenges, the relationship between China and LAC is entering a new phase, gradually taking shape.

Notes

[1] Michael Clarke, ‘The Belt and Road Initiative: China’s new grand strategy?’, Asia Policy, vol. 24 (2017): 71–9.

[2] Lee Jones and Zeng Jinghan, ‘Understanding China’s “Belt and Road Initative”: Beyond “grand strategy” to a state transformation analysis’, Third World Quarterly, vol. 40, no. 8 (2019): 1415–39.

[3] Rhys Jenkins, ‘China’s Belt and Road Initiative in Latin America: What has changed?’, Journal of Current Chinese Affairs, vol. 51, no. 1 (2022): 13–39.

[4] Nancy Birdsall, Augusto de la Torre and Felipe Valencia Caicedo, ‘The Washington consensus: Assessing a damaged brand’, World Bank, Policy Research Working Paper 5316 (2010).

[5] Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks and Christoph Trebesch, ‘How China lends: A rare look into 100 debt contracts with foreign governments’, Economic Policy, vol. 2022, eiac054 (2021).

[6] Jeannette Larde and Ricardo J. Sánchez, ‘The economics infrastructure gap and investment in Latin America’, CEPAL Bulletin, FAL 332, no. 4 (2014).

[7] Ruben Gonzalez-Vicente, ‘In the name of the nation: Authoritarian practices, capital accumulation and the radical simplification of development in China’s global vision’, Globalizations, online first (2022). Anthony J. Bebbington, Denise Humphreys Bebbington, Laura Aileen Sauls, John Rogan, Sumali Agrawal, César Gamboa, Aviva Imhof, Kimberly Johnson, Herman Rosa, Antoinette Royo, Tessa Toubourou and Ricardo Verdum, ‘Resource extraction and infrastructure threaten forest cover and community rights’, Proceedings of the National Academy of Sciences of the United States of America, vol. 115, no. 52 (2018): 13164–73.

[8] Ruben Gonzalez-Vicente, ‘Over hills and valleys too: China’s Belt and Road Initiative in the Caribbean’, in Florian Schneider (ed.), Global Perspectives on China’s Belt and Road Initiative: Asserting Agency through Regional Connectivity, Amsterdam, NL: Amsterdam University Press, p. 171.

[9] Ruben Gonzalez-Vicente and Annita Montoute, ‘A Caribbean perspective on China–Caribbean relations: Global IR, dependency and the postcolonial condition’, Third World Quarterly, vol. 42, no. 2 (2021): 219–38.

[10] Wanjing (Kelly) Chen, ‘Sovereign debt in the making: Financial entanglements and labor politics along the Belt and Road in Laos’, Economic Geography, vol. 96, no. 4 (2020): 295–314.

[11] Margaret Myers and Kevin Gallagher, ‘Scaling back: Chinese development finance in LAC, 2019’, Dialogue and BU Global Development Center, China–Latin America Report (2020).

[12] Margaret Myers and Rebecca Ray ‘At a crossroads: Chinese development finance to Latin America and the Caribbean, 2022’, Dialogue and BU Global Development Center, China–Latin America Report (2023).

[13] Kjeld van Wieringen and Tim Zajontz, ‘From loan-financed to privatised infrastructure? Tracing China’s turn towards public–private partnerships in Africa’, Journal of Current Chinese Affairs, vol. 42, no. 3 (2023): 434–63.

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Trade, high-tech industry and the services sectors showed resilience in 2023’s post-pandemic recovery. In 2023, China’s goods export volume grew by 0.6 percent compared to the previous year, while goods import volume experienced a 0.3 percent decline, likely reflecting a weaker domestic demand. High-tech manufacturing in areas such as solar cells, service robots and integrated circuits continued to grow steadily. In November alone, their output surged by about 45 percent, 33 percent and 28 percent respectively. Large high-tech manufacturing enterprises saw a 6.2 percent increase in added value relative to the previous November. The strong growth in the high-tech industry can be attributed in part to continuous support from the Chinese government. Beijing has recognised the potential of high-tech firms in driving economic growth and innovation, and this support is expected to continue in the near future.

In 2023, growth in the services sector gained significant momentum, driven by increased consumer and business demand as China removed COVID-related restrictions and reopened provincial and national borders. The services sector grew by 5.8 percent, outperforming the other two pillars of the economy, agricultural (1.3 percent) and industrial production (4.6 percent).

China still faces significant challenges in several areas, including declining property investment (which has a flow-on effect on other industries, such as construction, architecture, real estate services, infrastructure and the financial sector), weak consumption growth and the risk of accumulating debt, all of which pose short-term risks to the Chinese economy.

In 2023, real estate investment declined by 9.6 percent, slightly less precipitous than the decline last year (10 percent) but still considered a deep contraction. Property sales declined by 8.5 percent, which was significantly less severe than the contraction in 2022 (24.3 percent). Throughout the year, the real estate climate index, a monthly economic indicator measuring the overall prosperity of the real estate sector, was stuck in the below-95 region, indicating very low prosperity for the sector.

The contraction in the property market stems from a series of policy crackdowns that started in late 2020, notably the ‘Three Red Lines’ policy designed to mitigate the danger to the economy from developers’ mounting debt. Beijing has since repeatedly emphasised that housing is for living in, not for speculation, reaffirming its determination to control the housing market. Despite a continuing decline in residential investment, the real estate sector showed signs of recovery in 2023, thanks to more positive government policies. For example, in January, the government announced a 21-point action plan aimed to improve the balance sheets of high-quality property developers. It has a strong focus on easing financial pressures of what they considered ‘high-quality’ developers. An important part of the plan is to ensure the completion and deliveries of houses from developers to buyers within the contracted timeframe (保交楼). The plan sets up special bonds and loans to support the said completion and deliveries. Another part of the plan is to relax the borrowing constraints set out by the ‘Three Red Lines’ policy and provide debt extensions to good-quality developers. Thirty pilot real estate developers will be the first to implement those new policies.

Beijing also introduced eased mortgage rules and relaxed requirements for first-home buyers to boost buyer confidence. The government even stepped in to tackle imminent collapses of property developer firms of systemic importance. The most prominent example is that the government dealt with the near bankruptcy of Evergrande, one of China’s largest real estate developers. Beijing’s heavy intervention in terms of debt restructuring and negotiation with global stakeholders ensured that Evergrande did not experience a full collapse, which might have caused a chain reaction that dragged down the real estate sector or even the banking sector more broadly.

The golden days of rapid property market expansion might be over. The era of high-leverage, high-debt and rapid market expansion created risks too huge to be ignored. The recent contraction caused pain and losses to many real estate firms, but was part of the process of establishing a sustainable, albeit much smaller, market with better-quality property developers and closer government oversight.

Local government debt poses another potential catalyst for a debt crisis in China. Beijing’s deep concern over the scale and sustainability of local government debt led to a reform of the local financial regulatory framework announced in March 2023. The Chinese government has also initiated a gradual restructuring of local government debt, including rolling over existing debts, extending loan terms at lower interest rates, and issuing special-purpose bonds to fund large infrastructure projects. Local government debt restructuring is a complex issue. It must strike a balance between preventing large-scale crises and establishing sustainable paths for local government budgets.

China has been grappling with the challenge of slow and uneven household consumption recovery in the post-pandemic period. Despite increases in total retail sales and services, the consumption of durable goods and big-ticket items remained sluggish in 2023. Chinese households appeared hesitant to spend. The National Bureau of Statistics Consumer Confidence Index (CCI) has remained below 100 since April 2022, suggesting a pessimistic sentiment among consumers. While the CCI trickled up to 94.9 in March 2023, it subsequently slid down to below 90 and remained there to the end of the year.

The share of household consumption in China’s GDP has been historically lower than in other countries of similar economic development levels, standing at 56 percent, compared to 66 percent in India and 67 percent in Thailand. The average consumption-to-GDP ratio in most advanced economies is around 80 percent. The COVID-19 pandemic exacerbated the situation because of its impact on household balance sheets. The Chinese government has implemented a series of fiscal and monetary policies, but these primarily affected businesses rather than households. Partly that was due to China’s inadequate social security network, which prevented the government from directly extending support and relief to households. The sluggish recovery of household consumption is therefore primarily a structural issue than a cyclical one. Long-term structural reforms in social security, income redistribution and the household registration system are needed to address this issue.

In 2023, China’s China Consumer Price Index (CPI) grew only by 0.2 percent, and the Chinese Producer Price Index (PPI) declined 15 months in a row. The prospect of very low inflation with an elevated debt poses more challenges to Beijing in stimulating the economy to restore it to its pre-pandemic growth level (the consensus on China’s growth potential is 5–6 percent). Beijing has highlighted the critical role of internal circulation in promoting economic growth in the post-pandemic era as part of the Dual Circulation strategy first introduced in May 2020 by President Xi Jinping. The goal of the Dual Circulation strategy is to foster a complementary and synergistic relationship between the domestic market (internal circulation) while maintaining openness to the global economy (external circulation) and integration with it.

On 11–12 December 2023, at the annual Central Economic Work Conference in Beijing, China’s leaders outlined the country’s economic priorities for 2024. Echoing with the former leader Deng Xiaoping’s famous slogan, ‘Development is the hard truth’ 发展是硬道理, this year’s conference prioritised ‘Maintaining High-quality Development as the New era’s “Hard Truth”’ 必须把坚持高质量发展作为新时代的硬道理, reiterating the party’s belief in the absolute importance of growth and development – but also high-quality growth that is sustainable, innovation-driven and consumption-led.

Since 2021, the central government has repeatedly emphasised the triple pressures of demand contraction, supply shock and weakened expectations that the Chinese economy faced. These pressures stemmed from various sources including the disruptions caused by its draconian lockdown policies around COVID-19, an unfavourable external economic environment, and rising geopolitical tensions. The 2023 Central Economic Work Conference reiterated those challenges and identified real estate, local government debt, and small and medium financial institutions (such as small and medium-sized banks, rural and community banks, and urban cooperative banks that serve regional or underserved segments of the population and are therefore more prone to economic shocks), as key areas of risk and advocated a coordinated national-level approach to resolving these problems.

Regarding the real estate sector, the conference proposed to establish a new development model for property developers, likely by 2024. As for local government debts, Beijing called upon major provinces to make their contributions to the overall debt restructuring effort. In addition, the conference reaffirmed the priorities of anchoring expectations and promoting growth and employment through active, likely stimulative, fiscal policy and prudent monetary policy. Notably, it placed anchoring expectations ahead of promoting growth and employment in the official statement, which has been interpreted as that Beijing’s growing concern over weakened household and business confidence had surpassed its concern over slowing growth and promoting employment. Accordingly, one could expect to see more policies that are targeted to support household consumption and income, and reforms aimed at addressing inadequacies in the social security networks and household registration system, although the reforms will likely be gradual and incremental.

Looking ahead, the Chinese economy is experiencing increasingly difficult challenges. Faced with the challenge of a volatile external environment, the central government has identified the domestic market as the key driver of growth. The million-dollar question is how to build the demand and supply network to ensure a circular flow in the domestic economy. China’s structural challenges, including broadening the reach of its social security system, making its household registration system flexible enough to allow a rational flow of labour between localities, the ageing population and rising labour costs, cannot be swiftly resolved. The three-year COVID-19 lockdowns and controls protected the most populous nation from an unimaginable public health disaster with economic consequences but disrupted China’s long-run growth trajectory. Technology and innovation, including in the digital economy, delivery services and the tech-intensive green trio of solar batteries, lithium-ion batteries and electric vehicles, hold the potential to drive growth. Navigating the challenges to achieve the party’s stated goal of becoming a moderately developed economy within a decade will require political resolve.

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Given his apparent lack of expertise in economic and financial affairs, it has long been assumed that Xi’s forte rests in pulling together a personally loyal clique of capable cadres. A master of Machiavellian-style palace intrigue, within ten years of assuming power, he had ensured that his clique dominated all major offices in the party-state apparatus.

However, both former Foreign Minister Qin and General Li – as well as the disgraced commander and political commissar of the Rocket force, Generals Li Yuchao 李玉超 and Xu Zhongbo 徐忠波 – had been considered Xi protégés. The failure to disclose fully to the public the reasons behind their demise testifies to problems Xi is facing in running the party-military apparatus. The lack of due process in senior-level appointments and sackings under Xi has opened him to criticism by other ‘princelings’ (the offspring of the PRC’s founding fathers). In the run-up to the celebration of the 125th anniversary of former state president Liu Shaoqi’s  刘少奇 birthday, Liu’s son, General Liu Yuan 刘源, published an article entitled ‘Affirm and insist upon the system of democratic centralism; strengthen the construction of organization and institutions’ in the official journal Research on Mao Zedong Thought. General Liu – who reportedly does not see eye to eye with Xi – seems to be critiquing Xi’s dictatorial ruling style. Given that his father was persecuted to death by Mao at the start of the Cultural Revolution, General Liu’s statement might have been more pointed than it seemed.

In general, the party-state apparatus since the 20th Party Congress has been dominated by apparatchiks (political officials responsible for issues including ideology, national security, personnel and propaganda) and not technocrats (often English-speaking cadres who might have been trained abroad in science or technological fields or economics, and who understand economic principles, modern financial tools and international trade). While quite a few of the current Xi-appointed Politburo have at least bachelor’s degrees in technology-related subjects, they have built their careers in party affairs, especially ideology or organisation. The best example is the Vice-Premier in charge of finance and economics, He Lifeng 何立峰, who worked with Xi for more than ten years when the latter was based in Fujian. He has Xi’s full trust, but he is not a technocrat and is a newcomer to policy-making in the areas of finance and international economics. He is therefore a far cry from his predecessor, former Vice-Premier Liu He 刘鹤 (in office 19 March 2018 – 12 March 2023), an economist with a masters degree in public administration from Harvard. Liu He was in charge of negotiations with the United States over tariffs and other financial issues during a particularly tense time in bilateral relations. Liu He was also a close adviser to Xi before retiring. Meanwhile, the older generation of technocrats employed by Premier Zhu Rongji and his successor Premier Wen Jiabao in the late 1990s and early 2000s – including former People’s Bank of China Governor Zhou Xiaochuan 周小川 and Minister of Finance Lou Jiwei 楼继伟 – have all stepped down due to age requirements.

The rise of the ‘national security faction’

The only Politburo Standing Committee (PBSC) member accompanying Xi during his recent summit with US President Biden on 15 November in San Francisco was Cai Qi 蔡奇. Although ranked fifth in the PBSC pecking order, he controls the police-state apparatus in his capacity as a vice-chairman of the Central National Security Commission 中央国家安全委员会 as well as being its head of the General Office. His formal title is head of the CPC Central Committee Secretariat 中共中央书记处; other members of the Secretariat include the Minister of Public Security Wang Xiaohong 王小洪 and the Minister of State Security Chen Yixin 陈一新. It is the first time in CPC history that heads of the ministries of public security and state security have had slots on the Secretariat, signifying the centrality of security to Xi’s administration. Moreover, Cai is director of the CPC Central Committee General Office 中央委员会办公厅主任, which controls all party-related decision-making and implementation. The General Office is the nerve centre of the entire party apparatus. It is the first time that a PBSC member has held this critical position. Cai is also responsible for the well-being and safety of Xi in his capacity as head of the Party General Secretary’s Office 国家主席办公厅.

There is speculation that a subtle power struggle has erupted between Cai Qi’s faction of national security apparatchiks and Premier Li Qiang’s 李強 State Council bureaucrats. Li Qiang is ranked No. 2 in the PBSC pecking order, just behind Xi. Yet his performance as premier – in theory the person responsible for the whole economy – since assuming the post this year has been low-profile and lacklustre, especially compared to his predecessor Li Keqiang 李克强, who was deemed a committed market-oriented reformer. Li Qiang has said publicly that the role of the State Council is to implement decisions made by top party committees – for example, the Central Commission on Finance and Economics – headed by Xi. Under Xi’s instruction that party organs should take the lead in policy formulation, the status and power of the State Council has been truncated.

Li Qiang (a former governor of Zhejiang Province, where Xi worked from 2002 to 2007) represents the Zhejiang subfaction of Xi Jinping’s faction. Cai Qi and He Lifeng represent the Fujian subfaction (where Xi worked from 1985 to 2002). Appointments since the 20th Party Congress have demonstrated that the senior cadres of the Fujian subfaction have outnumbered those of the Zhejiang subfaction.

Policy-making mismanagement

Xi’s failures in managing high-level personnel and his apparent lack of success in putting together a team that can reverse the economic slowdown has been responsible for a series of ill-conceived policies, discussed below.

Putting national security concerns above attracting foreign direct investment

The weeks after the Biden–Xi summit in San Francisco witnessed more multinational corporations pulling out of the PRC. The purported ‘smile diplomacy’ pursued by the Xi delegation in the United States produced very little in terms of reviving the domestic economy. Foreign investors and businesses are aware that the Ministry of State Security has stepped up its harassment of foreign firms, particularly those handling due diligence, accounting and consultancy. It has launched a propaganda campaign urging Chinese citizens to report foreign spies, liberally defined, and even issued an instruction warning businesspeople (domestic and foreign) ‘not to short’ the stock market. Several senior staff (including Americans) working for the China-based offices of multinationals have not been allowed to leave the country. Despite repeated requests from the CPC administration, Washington has yet to relax efforts to cut China off from US investment (including wealth funds) and from the global supply chain in high-tech areas such as IT, AI and pharmaceuticals. According to JPMorgan, in the second quarter of 2023, foreign direct investment fell to its lowest level in twenty-six years. It is likely that the pace of foreign direct investment leaving China will further accelerate. Yet even when Beijing talks about luring back multinationals, it has announced no favourable policies such as allowing them a bigger share of the market or giving them more flexibility in moving foreign exchange in and out of China. The Free Trade Zones advertised by the Chinese government in the past few years have failed to attract significant investment from multinationals, meaning that they are not attractive to potential investors in China. Initial public offerings (IPOs) of Chinese firms in both China and Hong Kong have also shrunk in both numbers and size of capital.

Too little too late in saving the real estate sector

It was only in mid-November 2023 that the State Council announced one trillion yuan of low-cost financing to help a select list of struggling real estate firms to restructure their loans and ensure that they complete unfinished apartments already sold to customers. This is a case of too little too late. After Evergrande, the biggest developer in the PRC, announced its insolvency in late 2021, other property firms, including HK-based Country Garden and China Vanke, followed. Yet the party-state apparatus has done nothing to stop these overleveraged firms from continuing to draw huge loans from friendly state bankers and to raise bonds (for which they cannot even make the minimum interest payments). It is understood that these firms pay hefty bribes to bankers and bond issuers for their services. Anti-graft operations have yet to start in earnest.

In September 2023, in response to massive complaints from home buyers – including millions who faced difficulty paying mortgages for unfinished apartments – Beijing dangled the possibility of the state rolling out ‘subsidised housing’ 保障房. Under the so-called Singapore model, by which the government provides good-quality subsidised flats to residents, state-backed housing would play a big role in China’s housing market. This would put to an end the monopolisation of the housing market by developers of expensive ‘commodity flats’ 商品房. At this stage, details are lacking. State Council Document 14 on the this subject simply states that there will be a return to ‘subsidised’ housing. At time of writing there have been no detailed announcements as to who will be entitled to subsidised housing.

Widening social economic unrest

After the official statistics showed that youth unemployment had risen to 21 percent in the first quarter of 2023, the State Statistical Bureau stopped releasing new figures on this sensitive issue. Findings by a Peking University professor claim that as many as 46.5 percent of young people are jobless.

A related point is the shrinking population. Government subsidies amounting to RMB 3,000 or more for urban couples to have a child are not working because raising a child in a city has become prohibitively expensive even for middle-class families – not to mention labourers who are struggling to make ends meet. As with the sudden ban on tutoring schools and restrictions on the hours students can spend on online gaming, it is a case of poor planning and untimely execution of policies. These decisions have not been popular and have hurt business confidence.

As a result of unhappiness with such policies and the economic downturn, protests have increased in dozens of cities and towns. Protestors including laid-off workers, labourers who fail to receive their pay cheque in time, distressed mortgage payers, and depositors who could not withdraw money from accounts with local government banks.

Meanwhile local administrations have piled up debt amounting to 92 trillion. Local-level government bankruptcies means that not only civil servants and teachers but also police and people’s armed police (PAP) members cannot get their salaries. A big chink in the armour of China’s surveillance and police apparatus has appeared. In response, various levels of party cells have asked state-owned enterprises (SOEs) to revive their own security teams, which were active during the Mao years. Called renwubu 人武部 (people’s militia departments), these security teams are paid for by SOEs but also keep an eye on law and order in their areas.

The increasing police-state atmosphere has particularly alarmed members of the 400 million members of China’s middle classes. The increasingly stringent control over the movement of foreign currency in and out of the country has made it difficult for Chinese who want to emigrate to Western countries. But this has not stopped frustrated Chinese from taking dangerous and often illegal paths to leave China. The number of ‘refugees’ or ‘escapees’ from China trying to reach the United States by traversing dangerous terrain in South and Central America testifies to the loss of faith among many Chinese in the communist system.

As of this writing, the Xi leadership has still not convened the much-anticipated Third Plenum of the 20th Central Committee. Usually, third plenums, which discuss economic and sociopolitical policies and reforms, are called in October or November. Xi’s failure to assemble and keep a capable leadership team, or to introduce timely measures to address the nation’s multifaceted problems, have cast on doubt Xi’s ability to remain a ‘leader for life’ – and even, perhaps, the Party’s own ‘mandate of heaven’.

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