By Yan Chungou, Commentary
Economist Li Daokui argued at an economic forum on July 12 that China’s economy has remained “overall sluggish” for three consecutive years. Citing an estimated unemployment rate of 10.2 percent, roughly double the official figure, along with rare negative growth in fixed-asset investment and mounting local government debt, Li called on Beijing to issue roughly twice as much government debt in 2026 as currently planned.
But commentator Yan Chungou argues that additional borrowing would do little to reverse China’s economic decline because the country’s problems are “fundamentally political” rather than financial.
According to Yan, proposals for larger fiscal stimulus have circulated for years. If simply issuing more debt could restore growth, he argues, Beijing would already have done so. The fact that authorities have hesitated suggests policymakers themselves doubt that borrowing alone can revive the economy.
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Deeply rooted structural problems
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Yan points to China’s local government debt crisis as an example. For years, local authorities relied heavily on property development and infrastructure projects financed through borrowing to meet economic growth targets encouraged by Beijing. Now that many of those debts have become unsustainable, he argues, the central government has largely adhered to the principle that local governments should resolve their own financial problems rather than expecting comprehensive bailouts.
In Yan’s view, however, the roots of today’s economic slowdown extend well beyond the property sector. He argues that China’s economic vitality began fading as Beijing gradually shifted away from the market-oriented reforms that fueled decades of rapid growth.
While the early years of reform and opening encouraged experimentation and private enterprise, he contends that subsequent administrations increasingly expanded the role of state-owned enterprises and centralized political control, a trend that accelerated under Chinese leader Xi Jinping.
According to Yan, this policy shift reversed many of the conditions that had previously driven China’s economic rise. “The advantages of China’s economy did not come from centralized control,” he argues. “They came from reform and opening up, from the vitality of the market economy, and from integrating with the global economy.”
Debt is a symptom, not the cause
Yan also contends that as the state expanded its role in the economy, private investment weakened, market confidence deteriorated, and relations with many Western democracies became increasingly strained, further reducing the external conditions that had supported China’s earlier growth.
He argues that the current slowdown demonstrates the limitations of the longstanding policy often described as “the state advances while the private sector retreats.” If greater state control were sufficient to sustain economic growth, he writes, centrally planned economics would have proven its superiority. Instead, he argues, market dynamism diminished as political control expanded.
Yan further contends that the Chinese Communist Party (CCP) has historically turned to market-oriented reforms only during periods of severe economic distress, only to reassert tighter political control once conditions improved. In his view, this recurring cycle has repeatedly undermined the long-term sustainability of economic reform.
A double-edged sword
Rather than viewing the economy as Beijing’s highest priority today, Yan argues that the Party leadership is primarily focused on preserving political stability. He writes that resources are increasingly being directed toward military modernization, domestic security, and technological surveillance, including expanding artificial intelligence capabilities for social control.
Faced with mounting external tensions and internal pressures, he argues, the leadership views maintaining the Party’s rule as more urgent than restoring robust economic growth. “As the economy deteriorates, ordinary people suffer,” Yan writes. “If the Party’s rule collapses, it is the Communist Party itself that pays the price.” For that reason, he argues, proposals centered solely on fiscal stimulus misunderstand Beijing’s priorities.
In Yan’s assessment, China’s leadership does not face a temporary economic downturn but a structural dilemma of its own making. Political liberalization, he argues, could restore confidence in markets but would also weaken the Party’s monopoly on power. Yet continued political centralization further constrains economic vitality.
That contradiction, Yan concludes, leaves Beijing trapped between preserving authoritarian control and restoring sustained economic growth.
Editorial note: This article reflects the views of commentator Yan Chungou and does not necessarily represent the views of Vision Times.
