Xi Jinping admits the obstacles to economic recovery, but relaunches his development plan
“Along the way, we are bound to encounter headwinds. Some businesses have struggled. Some people have struggled to find work and meet basic needs.”. All the international media focused mainly on the statements about Taiwan (actually not new and very concise among other much more in-depth points), but this is one of the most interesting passages of the New Year's speech by Xi Jinping.
The Chinese president has effectively admitted that the China has encountered and will continue to encounter problems on the road to economic recovery. A recovery that was slower than expected after the Covid-19 pandemic, the war in Ukraine and the “risk reduction” promoted by the United States and the European Union in their commercial relations with the Asian giant. It is significant that in the speech traditionally dedicated to the results achieved in the past year, Xi did not hold back in mentioning some difficulties.
“Some places have been affected by floods, typhoons, earthquakes or other natural disasters. All of these aspects remain at the forefront of my mind. When I see that people rise to the occasion, that they reach out to each other in adversity, that they face challenges head-on and overcome difficulties, I am deeply moved,” he continued. “We will remember this year as a year of hard work and perseverance”, one of the key words of Xi's rhetoric in the last two years.
And even though the Chinese leader has reiterated several times that for the future there is “full confidence”, in all likelihood those “turbulent waters” which he himself mentioned during the XX Congress of the Communist Party in October 2022 (the one that gave him the third mandate as general secretary) will continue to have to be navigated very carefully. Also in 2024, the year in which the People's Republic of China will celebrate the 75th anniversary of its foundation, which took place on 1 October 1949 following the civil war won by Mao Zedong.
On the internal level, Xi has several unknowns to face, starting from the economy after the widening of the real estate crisis of recent months and the increase in youth unemployment, which has reached over 20 percent: almost double pre-Covid levels. The issue is part of another broader problem: the demographic decline, which involves the continuous decline in marriages and births. The number of marriages in China has declined for nine consecutive years, halving in less than a decade. In 2022, about 6.8 million couples registered for marriage, the lowest number since registrations began in 1986, down from 13.5 million in 2013.
Although the number of marriages in 2023 has increased compared to the previous year, separations also increase in the same way. Young people are discouraged by the high expenses necessary to build a family and have children, starting from the cost of entering a child into the education system. Marrying less and later is a natural consequence of a more economically and culturally developed society, as already seen in many other Asian and Western societies.
Possible maneuvers on education and pensions
For this reason, several experts argue that Beijing should reform the education system. Among the proposals, the adjustment of teacher quotas, and the reconsideration of the regional distribution of resources to deal with the collapse in the birth rate. According to Ding Changfa, associate professor at Xiamen University, the impact of the reduction in the influx of new students will be greater on primary schools in rural areas and on schools in small towns, especially in cities with limited resources, compared to developed areas and places with a large influx of population.
There are also those who believe that the government may have to carry out pension reform. In recent months, Jin Weigang, president of the Chinese Academy of Labor Sciences and Social Security, told state media that China is studying a “progressive, flexible and differentiated path for raising the retirement age.” This means that it will be a progressive change: people close to retirement age will only have to delay retirement by a few months, while younger people will have to work a few more years before retiring.
It would be a significant move also and above all for overcoming a traditional taboo in Chinese politics. The retirement age in China is among the lowest in the world: 60 years for men, 55 for female employees and 50 for women working in factories. Rules no longer in line with China's economic and demographic trends. On the other hand, local governments are in difficulty in terms of allowances and welfare after three years of huge expenses to support the imposing machine of the zero Covid strategy.
In Xi's vision, China needs to achieve greater stability and imperviousness to the geopolitical turbulence of the outside world. For this reason, a new growth model must be achieved, even if we lose a few decimals along the way. “We will firmly advance China's modernization, fully and faithfully apply the new development philosophy on all fronts, accelerate the construction of the new development paradigm, promote high-quality development, pursue development and safeguard security,” he said Xi in his end-of-year speech. And again: “We will continue to act according to the principle of seeking progress while maintaining stability, promoting stability through progress, and establishing the new before abolishing the old. We will consolidate and strengthen the momentum of economic recovery and work to achieve steady economic development and in the long term.”
Ambitious goals, especially when the surrounding waters are turbulent.
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