On Nov. 7, China’s Ministry of Finance announced that it would continue its “Special Action Plan to Stimulate Consumption,” offering interest subsidies for consumer and business loans in an effort to reverse the ongoing deflationary cycle.
Economist Xiang Songzuo cautioned that China’s weak consumption is not a result of limited credit, but rather deeper structural issues — stagnant employment, a collapsing property market, and a fragile social safety net. Relying solely on subsidized borrowing, he said, will not solve these problems.
Political commentator Gongzi Shen, in his latest analysis, went further. He argued that Xi Jinping’s concentration of power, ideological tightening, and use of digital authoritarianism are pushing China toward one-man rule — stifling innovation, eroding economic vitality, and undoing the achievements of the reform era.
According to the Finance Ministry’s Nov. 7 statement, Beijing will continue subsidizing interest on personal consumption loans and business credit, effectively encouraging households to borrow and spend. The measure builds on a policy first introduced in August, aimed at stimulating domestic demand by lowering borrowing costs.
Yet, as TOM Finance noted, the policy clashes with economic reality: household debt has already reached about 70 percent of GDP, much of it tied to real estate. With local governments running out of money, critics argue that encouraging consumers to take on more debt amounts to “draining the people’s remaining wealth.”
Success
You are now signed up for our newsletter
Success
Check your email to complete sign up
Xiang compared the initiative to an upgraded version of the 2016 “price-rise to reduce inventory” strategy — a bid to engineer mild inflation to fight deflation. But this “2.0 version” faces tougher challenges: consumer pessimism about future income and record-low private investment. In 2023, private investment growth was just 0.9 percent, the weakest in four decades, underscoring deep erosion of business confidence and market dynamism.
Real estate: The drag at the core
The property market remains the heaviest anchor on consumption. Since mid-2025, first-tier city home prices have fallen around 35 percent, while second-tier cities dropped by roughly 40 percent. Some areas saw price collapses of 70 to 80 percent.
In Beijing’s southern districts, including Xihongmen and the South Fourth Ring, prices in older communities have fallen to just over 10,000 yuan per square meter — a fraction of their previous highs. Many homeowners now face negative equity, and are forced to borrow further just to repay mortgages.
Morgan Stanley’s chief economist Xing Zhiqiang forecast that the housing market might not hit bottom until 2027, leaving at least another year or two of pain ahead.
The slump has wiped out household wealth and spilled over to banks, developers, and supply-chain industries, forming a self-reinforcing downward spiral. Government efforts — from purchasing unsold housing to subsidizing developers — face major moral-hazard risks and limited short-term impact.
Xi’s political turn: From collective to personal rule
According to Gongzi Shen, Xi’s China has shifted from institutionalized authoritarianism to a more personal, centralized dictatorship, implemented through three main tactics:
- Reasserting party control over the state:
Xi has folded many State Council functions under the Communist Party, establishing and personally chairing multiple “central leading groups” — such as those for finance and reform — that bypass cabinet ministries. Decisions once made by technocrats now go directly through Xi. - Loyalty before competence:
Through sweeping purges and reshuffles, Xi has built a leadership team defined by loyalty rather than expertise. The current Politburo Standing Committee consists almost entirely of longtime allies. Similar purges in the military and bureaucracy reinforce a culture where obedience trumps capability. - Ideological conformity:
Ideology has become the core of political control. Universities, state media, and think tanks are ordered to “tell China’s story well,” while dissent and critical thought are suppressed — narrowing intellectual space and suffocating creativity.
The costs of concentrated power
Shen argues that Xi’s system has produced three major distortions:
- Administrative paralysis:
Officials, fearful of political missteps, avoid taking initiative. The rigid lockdowns during the COVID-19 pandemic epitomized this paralysis, breeding public anger and resentment. - Economic stagnation:
Overreach into the private sector has drained market vitality. Entrepreneurs are retreating, private investment is stagnant, and the country faces a worsening “state advances, private retreats” trend. - Intellectual decline:
The shrinking of free thought in academia and media has crippled China’s innovative potential, replacing genuine inquiry with conformity.
From growth-based legitimacy to ideological control
Under Xi, the Communist Party’s legitimacy has shifted from economic performance to ideological dominance.
During the reform era, rising prosperity bought public compliance. Now, as growth slows, the property bubble bursts, and youth unemployment soars, the regime leans increasingly on historical and nationalist narratives — such as “Without the Communist Party, there would be no New China” and “The East is rising.”
But younger generations are losing faith. Many find little resonance in Party slogans, focusing instead on the daily realities of joblessness and shrinking opportunity. Nationalism can unite the public in the short term, Shen noted, but when the promise of “national rejuvenation” remains unfulfilled, it risks turning into disillusionment and backlash.
Xi has deepened Party oversight of private enterprise through internal Party committees and “golden shares” that grant the state veto power over corporate decisions.
Companies such as Alibaba and Tencent now host Party representatives on their boards, subjecting key decisions to political scrutiny. This “party-state hybrid ownership” blurs the line between public and private, transforming the market from an engine of growth into a tool of control.
Digital authoritarianism in the Xi era
China’s new digital authoritarianism fuses AI, big data, and facial recognition to manage society with unprecedented precision. The pandemic’s health code system evolved into a permanent layer of surveillance through the social credit system and Data Security Law.
Shen argued that this “algorithmic governance” is more efficient than old-style totalitarianism — enforcing obedience through data rather than fear.
Meanwhile, the government’s “national system” for technological self-reliance faces its own contradictions. Bureaucracy and political interference stifle innovation. While Huawei is celebrated as a success story, its progress has relied on global supply chains. U.S. sanctions have exposed China’s dependence on imported chips, with SMIC lagging at least two generations behind TSMC and Samsung.
Xi’s foreign policy slogans — from a “community with a shared future for mankind” to “each country’s right to self-development” — aim to project moral leadership and challenge Western dominance.
Yet, as Shen observed, Beijing’s message of equality abroad clashes with its authoritarian inequality at home. This contradiction undermines its credibility and turns “win-win cooperation” into an exercise in power projection.
China’s reform-era success depended on global integration. Xi’s “dual circulation” strategy, prioritizing domestic demand while limiting dependence on foreign markets, was meant to safeguard sovereignty.
But weak consumption and persistent technological gaps make this strategy difficult to sustain. External circulation, meanwhile, is constrained by Western export controls. The result, Shen warned, is growing isolation and deeper structural weakness.
China at a crossroads
China stands at a critical turning point.
While subsidized loan schemes may offer temporary relief, they cannot fix the deeper issues of shrinking demand, collapsing confidence, and structural rigidity. The property crisis continues to erode household wealth, while ideological control and personal rule drain the country’s creative energy.
Gongzi Shen warned that Xi Jinping’s prioritization of political control over reform is accelerating institutional decay and could lead to long-term stagnation — or even systemic breakdown. Whether China can reopen its economy, revive pluralism, and return to market-driven reform will determine its prospects for sustainable growth in the years ahead.
