During the 30th anniversary of Shanghai’s Pudong economic development district, Chinese leader Xi Jinping said the Pudong District “should strive to become a pioneer of reform and opening up at a higher level and a vanguard in fully building a modern socialist country.” In his address, Xi mentioned “opening up” 30 times and stressed the need to “better showcase the Chinese concept, Chinese spirit, and Chinese path to the world.”
The conference on Nov. 12 was hosted by Li Qiang, Party secretary of the Shanghai municipal committee, Liu He, vice premier of the state council, and Chen Xi, minister of the organization department of the central committee, with He Lifeng, director of the development and reform commission, attending.
Premier Li Keqiang, who is in charge of China’s economy, didn’t show up. Whereas Xi Jinping, rather than giving a video address, actually attended in person.
Financial System About to Collapse
Xi’s appearance at the Pudong conference coincides with the Chinese bond market experiencing trouble and many defaults. The Chinese financial system is on the brink of collapse, with a loaded debt crisis engulfing local governments and state-owned enterprises.
According to Chinese media reports, about 69 percent of outstanding loans to China’s private enterprises defaulted in the first three quarters of 2020. At the same time, there were also successive delinquencies by state-owned enterprises.
For example, Brilliance Auto Group, officially known as HuaChen Group Auto Holding and owned by the Liaoning provincial government, failed to repay 1 billion yuan (about $152 million) to its bondholders after the bond matured in October. The Liaoning state-owned enterprise Shenyang Shengjing Energy was also in debt default, and on Nov. 13, Henan state-owned Yongcheng Coal Power Company defaulted on a 1 billion yuan bond.
Furthermore, Ziguang Group, China’s largest semiconductor group and the third-largest shareholder of Semiconductor Manufacturing International Corporation, China’s leading chipmaker, is also on the verge of default after Peking University Founder Group filed bankruptcy due to a debt crisis. Ziguang Group’s debt has now reached more than 200 billion yuan (about $30 billion). According to Chinese media reports, Ziguang applied for an extension of a 1 billion yuan trust loan that was due on Nov. 9, but failed to get approval by the bank in Anhui.
China’s debt market is facing a difficult situation that hasn’t been seen in many years. Market confidence has been overshadowed by various types of debt defaults, from the default of local government investments to the default of state-owned enterprise credit bonds. And panic also has been spreading. A clifflike decline in financing has led to a break in the chain of subsequent refinancing funds that might trigger a systemic financial failure.
Beginning in 2019, China’s economy entered a phase that Beijing labeled as “state-owned enterprises advance and private sectors retreat.” It means the regime’s elite began going after big money and exercising control over private capital.
For example, the Chinese Communist Party (CCP) has tightened its control over large private companies such as Alibaba, Tencent, and JD.com that have a broad and powerful influence in the country. The recent listing of Ant Financial was directly suspended by the CCP.
In order to allow state-owned enterprises to play the leading role in the economy of mainland China, the CCP intends to significantly reduce the financing channels for private enterprises to issue bonds, to ensure that the public can only choose bonds issued by the CCP’s state-owned enterprises. But the frequent defaults by state-owned enterprises is an indication of the current deterioration of China’s economy and of the financial difficulties experienced by the regime.
At the executive meeting of the State Council of the Communist Party of China held on Nov. 6, Premier Li Keqiang frankly admitted that “under the special and difficult circumstances [brought about] by the pandemic, we insist on the government leading by example in living on a tight budget.”
In the past, the CCP has relied on high-speed economic growth to cover up various social contradictions and economic problems. At present, due to the rapid economic downturn in China, those contradictions and problems have all been revealed.
In particular, the reduction of central and local fiscal revenues and the social instability caused by a large unemployment rate, as well as the social injustice caused by various other expenditures, are enough to pose a challenge and impact for the regime.
Take the pension for corporate retirees as an example. On Nov. 6, the CCP published the guidelines “Hundred Questions on Learning and Guidance” for China’s future social and economic direction that came out of the recent Fifth Plenary Session. It stated that “the national basic pension insurance fund for corporate employees is expected to have a deficit by 2029, and by 2036, it will be exhausted. The basic medical insurance pool for corporate employees is also expected to have a deficit in 2024.”
More Slogans to Deal With Difficulties
After the CCP implemented the national security law in Hong Kong and openly violated the city’s “one country, two systems,” it then passed a resolution that led to the disqualification of four Hong Kong pro-democracy lawmakers, causing a public uproar. The CCP’s actions of undermining Hong Kong’s democracy will only cause foreign investors to further lose confidence in investing in the city.
In addition, on Nov. 12, U.S. President Donald Trump issued an executive order prohibiting U.S. companies and individuals from investing in 31 Chinese enterprises owned or controlled by the Chinese military (the People’s Liberation Army) on the grounds of national security. In this context, foreign investors will not only reduce their investment activities in China, but also reduce their investment in Chinese companies listed overseas. This also shows that the United States has begun to decouple from the CCP via the financial market.
Even though Xi himself made an appearance in Shanghai at this time, the reason he used the term “opening up” 30 times was to instill confidence in the outside world and to resolve the economic problems. Obviously, Xi doesn’t realize that the CCP’s grinding down of Hong Kong has made the outside world lose trust in its propaganda about opening up.
Xi’s “Chinese concept, Chinese spirit, and Chinese path” is just another communist slogan. With the so-called Chinese path, Xi is directly speaking of the fact that the CCP will never follow international rules and conventions set forth by democracy, but continue its plan to expand hegemony. The “Chinese concept, Chinese spirit” is meant to continue brainwashing the Chinese people with the conjured image of a “great power and a powerful country.” It’s to stimulate the people’s national self-esteem, and to cover up the pain and suffering they have endured under the CCP’s tyranny.
However, in the present international and domestic environment, China’s economic downturn will inevitably continue on for some time. The “Chinese concept, Chinese spirit, and Chinese path” is nothing more than a slogan for the CCP to continue its tyranny, and it won’t resolve the regime’s domestic problems, such as widespread and pervasive social injustice. The expansion of its hegemony also will not proceed. Especially under this unprecedented isolation of China by the international community, the CCP’s “internal cycle” of “great changes unseen in a century” is taking the regime’s economy along the road of no return.
Huidong Zhang previously worked in China’s real estate and heavy industry sectors. He has contributed economy-related commentary to The Epoch Times since 2020.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.