A Hong Kong court has ordered China's debt-laden property giant Evergrande to liquidate. How did Evergrande become the face of China's real estate crisis? Will its downfall impact China's economy? Molly Gambhir reports.

Gravitas: Will Evergrande's fall impact China's economy?

Construction and property sales have slumped. Small businesses have shut because of rising costs and weak sales. Debt-laden local governments are cutting the pay of civil servants.

China’s economy slowed markedly in the final months of last year as government measures to limit real estate speculation hurt other sectors as well. Lockdowns and travel restrictions to contain the coronavirus also dented consumer spending. Stringent regulations on everything from internet businesses to after-school tutoring companies have set off a wave of layoffs.

China’s National Bureau of Statistics said Monday that economic output from October through December was only 4% higher than during the same period a year earlier. That represented a further deceleration from the 4.9% growth in the third quarter, July through September.

The world’s demand for consumer electronics, furniture and other home comforts during the pandemic has produced record-setting exports for China, preventing its growth from stalling. Over all of last year, China’s economic output was 8.1% higher than in 2020, the government said. But much of the growth was in the first half of last year.

The snapshot of China’s economy, the main locomotive of global growth in the past few years, adds to expectations that the broader world economic outlook is beginning to dim. Making matters worse, the omicron variant of the coronavirus is now starting to spread in China, leading to more restrictions around the country and raising fears of renewed disruption of supply chains.

The slowing economy poses a quandary for China’s leaders. The measures they have imposed to address income inequality and rein in companies are part of a long-term plan to protect the economy and national security. But officials are wary of causing short-term economic instability, particularly in a year of unusual political importance.

Next month, China hosts the Winter Olympics in Beijing, which will focus an international spotlight on the country’s performance. In the fall, Xi Jinping, China’s leader, is expected to claim a third five-year term at a Communist Party congress.

With growth in his country slowing, demand slackening and debt still at near-record levels, Xi could face some of the biggest economic challenges since Deng Xiaoping began lifting the country out of its Maoist straitjacket four decades ago.

“I’m afraid that the operation and development of China’s economy in the next several years may be relatively difficult,” Li Daokui, a prominent economist and Chinese government adviser, said in a speech late last month. “Looking at the five years as a whole, it may be the most difficult period since our reform and opening up 40 years ago.”

China also faces the problem of rapid aging, which could create an even greater burden on China’s economy and its labor force. The National Bureau of Statistics said Monday that China’s birthrate fell sharply last year and is now barely higher than the death rate.

Private Sector Struggles

As costs for many raw materials have risen and the pandemic has prompted some consumers to stay home, millions of private businesses have crumbled, most of them small and family owned.

That is a big concern because private companies are the backbone of the Chinese economy, accounting for three-fifths of output and four-fifths of urban employment.

Kang Shiqing invested much of his savings nearly three years ago to open a women’s clothing store in Nanping, a river town in southeastern China’s Fujian province. But when the pandemic hit a year later, the number of customers dropped drastically and never recovered.

As in many countries, there has been a broad shift in China toward online shopping, which can undercut stores by using less labor and operating from inexpensive warehouses. Kang was stuck paying high rent for his store despite the pandemic. He finally closed it in June.

“We can hardly survive,” he said.

Another persistent difficulty for small businesses in China is the high cost of borrowing, often at double-digit interest rates from private lenders.

Chinese leaders are aware of the challenges private companies face. Premier Li Keqiang has promised further cuts in taxes and fees to help the country’s many struggling small businesses.

On Monday, China’s central bank made a small move to reduce interest rates, which could help reduce slightly the interest costs of the country’s heavily indebted real estate developers. The central bank pushed down by about a tenth of a percentage point its interest rate bench marks for one-week and one-year lending.

Construction Stalls

The building and fitting out of new homes has represented one-quarter of China’s economy. Heavy lending and widespread speculation have helped China erect the equivalent of 140 square feet of new housing for every urban resident in the past two decades.

This autumn, the sector faltered. The government wants to limit speculation and deflate a bubble that had made new homes unaffordable for young families.

China Evergrande Group is only the largest and most visible of a lengthening list of real estate developers in China that have run into severe financial difficulty lately. Kaisa Group, China Aoyuan Property Group and Fantasia are among other developers that have struggled to make payments as bond investors become more wary of lending money to China’s real estate sector.

As real estate companies try to conserve cash, they are starting fewer construction projects. And that has been a big problem for the economy. The price of steel reinforcing bars for the concrete in apartment towers, for example, dropped by one-quarter in October and November before stabilizing at a much lower level in December.

The decline in home prices in smaller cities has hurt the value of people’s assets, which in turn made them less willing to spend. Even in Shanghai and Beijing, apartment prices are no longer surging.

There have been faint hints of renewed government support for the real estate sector in recent weeks, but no sign of a return to lavish lending by state-controlled banks.

The financial distress of Evergrande “is a signal that money will be pushed from real estate to the stock market,” said Hu Jinghui, an economist who is the former chair of the China Alliance of Real Estate Agencies, a national trade group. “The policies can be loosened, but there can be no return to the past.”

Local Governments Feel the Pinch

The slowdown in the housing market has also hurt local governments, which rely on land sales as a key source of revenue.

The International Monetary Fund estimates that government land sales each year have been raising money equal to 7% of the country’s annual economic output. But in recent months, developers have curtailed land purchases.

Starved of revenue, some local governments have halted hiring and cut bonuses and benefits for civil servants, prompting widespread complaints on social media.

In Hangzhou, the capital of Zhejiang province, a civil servant’s complaint of a 25% cut in her pay spread quickly on the internet. The municipal government did not respond to a fax requesting comment. In northern Heilongjiang province, the city of Hegang announced that it would not hire any more “low-level” workers. City officials deleted the announcement from the government’s website after it drew public attention.

Some governments have also raised fees on businesses to try to make up for the shortfall.

Bazhou, a city in Hebei province, collected 11 times as much money in fines on small businesses from October through December as it did in the first nine months of last year. Beijing criticized the city for undermining a national effort to reduce the cost of doing business.

Pockets of Strength in Exports

Strong overseas demand for China’s exports, particularly consumer goods, spurred a national wave of new factory investments, up 13.5% last year from 2020.

Some areas of consumer spending have been fairly robust, notably the luxury sector, with sports cars and jewelry selling well. Retail sales rebounded 12.5% last year compared to pandemic-depressed levels in 2020. But retail sales fell in December compared to November, as coronavirus restrictions kept some shoppers at home.

Some areas of consumer spending have been fairly robust, notably the luxury sector, with sports cars and jewelry selling well.

Few anticipate that the government will allow a severe economic downturn this year, before the Communist Party congress. Economists expect the government to soften its restrictions on lending and step up government spending.

“The first half of the year will be challenging,” said Zhu Ning, deputy dean of the Shanghai Advanced Institute of Finance. “But then the second half will see a rebound.”

Construction and property sales have slumped. Small businesses have shut because of rising costs and weak sales. Debt-laden local governments are cutting the pay of civil servants.

Construction and property sales have slumped. Small businesses have shut because of rising costs and weak sales. Debt-laden local governments are cutting the pay of civil servants. China’s economy slowed markedly in the final months of last year as government measures to limit real estate speculation hurt other sectors as well. Lockdowns and travel restrictions to contain the coronavirus also dented consumer spending. Stringent regulations on everything from internet businesses to after-school tutoring companies have set off a wave of layoffs. China’s National Bureau of Statistics said Monday that economic output from October through December was only 4% higher than during the same period a year earlier. That represented a further deceleration from the 4.9% growth in the third quarter, July through September. The world’s demand for consumer electronics, furniture and other home comforts during the pandemic has produced record-setting exports for China, preventing its growth from stalling. Over all of last year, China’s economic output was 8.1% higher than in 2020, the government said. But much of the growth was in the first half of last year. The snapshot of China’s economy, the main locomotive of global growth in the past few years, adds to expectations that the broader world economic outlook is beginning to dim. Making matters worse, the omicron variant of the coronavirus is now starting to spread in China, leading to more restrictions around the country and raising fears of renewed disruption of supply chains. The slowing economy poses a quandary for China’s leaders. The measures they have imposed to address income inequality and rein in companies are part of a long-term plan to protect the economy and national security. But officials are wary of causing short-term economic instability, particularly in a year of unusual political importance. Next month, China hosts the Winter Olympics in Beijing, which will focus an international spotlight on the country’s performance. In the fall, Xi Jinping, China’s leader, is expected to claim a third five-year term at a Communist Party congress. With growth in his country slowing, demand slackening and debt still at near-record levels, Xi could face some of the biggest economic challenges since Deng Xiaoping began lifting the country out of its Maoist straitjacket four decades ago. “I’m afraid that the operation and development of China’s economy in the next several years may be relatively difficult,” Li Daokui, a prominent economist and Chinese government adviser, said in a speech late last month. “Looking at the five years as a whole, it may be the most difficult period since our reform and opening up 40 years ago.” China also faces the problem of rapid aging, which could create an even greater burden on China’s economy and its labor force. The National Bureau of Statistics said Monday that China’s birthrate fell sharply last year and is now barely higher than the death rate. Private Sector Struggles As costs for many raw materials have risen and the pandemic has prompted some consumers to stay home, millions of private businesses have crumbled, most of them small and family owned. That is a big concern because private companies are the backbone of the Chinese economy, accounting for three-fifths of output and four-fifths of urban employment. Kang Shiqing invested much of his savings nearly three years ago to open a women’s clothing store in Nanping, a river town in southeastern China’s Fujian province. But when the pandemic hit a year later, the number of customers dropped drastically and never recovered. As in many countries, there has been a broad shift in China toward online shopping, which can undercut stores by using less labor and operating from inexpensive warehouses. Kang was stuck paying high rent for his store despite the pandemic. He finally closed it in June. “We can hardly survive,” he said. Another persistent difficulty for small businesses in China is the high cost of borrowing, often at double-digit interest rates from private lenders. Chinese leaders are aware of the challenges private companies face. Premier Li Keqiang has promised further cuts in taxes and fees to help the country’s many struggling small businesses. On Monday, China’s central bank made a small move to reduce interest rates, which could help reduce slightly the interest costs of the country’s heavily indebted real estate developers. The central bank pushed down by about a tenth of a percentage point its interest rate bench marks for one-week and one-year lending. Construction Stalls The building and fitting out of new homes has represented one-quarter of China’s economy. Heavy lending and widespread speculation have helped China erect the equivalent of 140 square feet of new housing for every urban resident in the past two decades. This autumn, the sector faltered. The government wants to limit speculation and deflate a bubble that had made new homes unaffordable for young families. China Evergrande Group is only the largest and most visible of a lengthening list of real estate developers in China that have run into severe financial difficulty lately. Kaisa Group, China Aoyuan Property Group and Fantasia are among other developers that have struggled to make payments as bond investors become more wary of lending money to China’s real estate sector. As real estate companies try to conserve cash, they are starting fewer construction projects. And that has been a big problem for the economy. The price of steel reinforcing bars for the concrete in apartment towers, for example, dropped by one-quarter in October and November before stabilizing at a much lower level in December. The decline in home prices in smaller cities has hurt the value of people’s assets, which in turn made them less willing to spend. Even in Shanghai and Beijing, apartment prices are no longer surging. There have been faint hints of renewed government support for the real estate sector in recent weeks, but no sign of a return to lavish lending by state-controlled banks. The financial distress of Evergrande “is a signal that money will be pushed from real estate to the stock market,” said Hu Jinghui, an economist who is the former chair of the China Alliance of Real Estate Agencies, a national trade group. “The policies can be loosened, but there can be no return to the past.” Local Governments Feel the Pinch The slowdown in the housing market has also hurt local governments, which rely on land sales as a key source of revenue. The International Monetary Fund estimates that government land sales each year have been raising money equal to 7% of the country’s annual economic output. But in recent months, developers have curtailed land purchases. Starved of revenue, some local governments have halted hiring and cut bonuses and benefits for civil servants, prompting widespread complaints on social media. In Hangzhou, the capital of Zhejiang province, a civil servant’s complaint of a 25% cut in her pay spread quickly on the internet. The municipal government did not respond to a fax requesting comment. In northern Heilongjiang province, the city of Hegang announced that it would not hire any more “low-level” workers. City officials deleted the announcement from the government’s website after it drew public attention. Some governments have also raised fees on businesses to try to make up for the shortfall. Bazhou, a city in Hebei province, collected 11 times as much money in fines on small businesses from October through December as it did in the first nine months of last year. Beijing criticized the city for undermining a national effort to reduce the cost of doing business. Pockets of Strength in Exports Strong overseas demand for China’s exports, particularly consumer goods, spurred a national wave of new factory investments, up 13.5% last year from 2020. Some areas of consumer spending have been fairly robust, notably the luxury sector, with sports cars and jewelry selling well. Retail sales rebounded 12.5% last year compared to pandemic-depressed levels in 2020. But retail sales fell in December compared to November, as coronavirus restrictions kept some shoppers at home. Some areas of consumer spending have been fairly robust, notably the luxury sector, with sports cars and jewelry selling well. Few anticipate that the government will allow a severe economic downturn this year, before the Communist Party congress. Economists expect the government to soften its restrictions on lending and step up government spending. “The first half of the year will be challenging,” said Zhu Ning, deputy dean of the Shanghai Advanced Institute of Finance. “But then the second half will see a rebound.”

China's economy slowed late last year on real estate troubles

After taking a hit in the first two quarters due to the COVID-19 outbreak, China's economy is expected to see a recovery this year, an International Monetary Fund (IMF) official has said. 
 
<a href="https://www.wionews.com/world/china-contributes-25-to-global-emissions-says-un-334993">Also read | China contributes 25% to global emissions, says UN</a> 
 
According to IMF report, China's economy is expected to grow 1.9 percent this year, almost twice as much as previously forecast. IMF tagged the superpower as the only major nation likely to expand in the face of the coronavirus.

However, it warned that with other countries and crucial markets still struggling to overcome the pandemic, the road ahead remained bumpy, while a standoff with the US on various issues posed a threat to the global recovery.

In an update to its World Economic Outlook on Tuesday, the IMF said it now sees annual growth of 1.9 percent, compared with its earlier prediction of one percent in June.

China's exports have "recovered from deep declines earlier in the year, supported by an earlier restart of activity", the IMF report said.

A "strong pickup in external demand for medical equipment and for equipment to support the shift to remote working", also boosted exports.

Chinese customs authorities on Tuesday said exports jumped 9.9 percent on-year in September, initially spurred by worldwide demand for Made-In-China personal protective equipment but now widening to household appliances and plastics.&nbsp;

China is the only major economy with a positive growth forecast for this year, according to the Fund.

"While recovery in China has been faster than expected, the global economy's long ascent back to pre-pandemic levels of activity remains prone to setbacks," the IMF said.

The body warned that the world faced a "long, hard, dire" path to post-pandemic recovery and slashed its annual forecasts further, predicting the global economy would shrink 5.2 percent, compared with a 4.9 percent contraction predicted in June.

The prolonged US-China trade war that has tipped into a bitter battle for global tech supremacy also threatened to undermine global recovery, IMF said.

As part of a partial trade truce signed in January, Beijing promised to import an additional $200 billion in American products over two years, ranging from cars to machinery and oil to farm products.

But the pandemic has put pressure on the agreement and China's purchases of those goods has been lagging.

The IMF warned that "tensions between the world’s two largest economies remain elevated on numerous fronts" as Beijing and Washington also lock horns over China's treatment of ethnic minorities in Xinjiang and Beijing's security clampdown in Hong Kong.

China is still battling localised coronavirus outbreaks, but has largely curbed its spread, allowing most businesses including cinemas and hotels to reopen and domestic tourists to travel.

The IMF expects the Chinese government to continue with its infrastructure spending to bolster growth through 2021.

But it warned against investments in "dirty sectors" including coal, cement and steel that have led to an increase in China's carbon emissions that previously peaked in 2013.

(With inputs from agencies)

After taking a hit in the first two quarters due to the COVID-19 outbreak, China's economy is expected to see a recovery this year, an International Monetary Fund (IMF) official has said.

After taking a hit in the first two quarters due to the COVID-19 outbreak, China's economy is expected to see a recovery this year, an International Monetary Fund (IMF) official has said. Also read | China contributes 25% to global emissions, says UN According to IMF report, China's economy is expected to grow 1.9 percent this year, almost twice as much as previously forecast. IMF tagged the superpower as the only major nation likely to expand in the face of the coronavirus. However, it warned that with other countries and crucial markets still struggling to overcome the pandemic, the road ahead remained bumpy, while a standoff with the US on various issues posed a threat to the global recovery. In an update to its World Economic Outlook on Tuesday, the IMF said it now sees annual growth of 1.9 percent, compared with its earlier prediction of one percent in June. China's exports have "recovered from deep declines earlier in the year, supported by an earlier restart of activity", the IMF report said. A "strong pickup in external demand for medical equipment and for equipment to support the shift to remote working", also boosted exports. Chinese customs authorities on Tuesday said exports jumped 9.9 percent on-year in September, initially spurred by worldwide demand for Made-In-China personal protective equipment but now widening to household appliances and plastics. China is the only major economy with a positive growth forecast for this year, according to the Fund. "While recovery in China has been faster than expected, the global economy's long ascent back to pre-pandemic levels of activity remains prone to setbacks," the IMF said. The body warned that the world faced a "long, hard, dire" path to post-pandemic recovery and slashed its annual forecasts further, predicting the global economy would shrink 5.2 percent, compared with a 4.9 percent contraction predicted in June. The prolonged US-China trade war that has tipped into a bitter battle for global tech supremacy also threatened to undermine global recovery, IMF said. As part of a partial trade truce signed in January, Beijing promised to import an additional $200 billion in American products over two years, ranging from cars to machinery and oil to farm products. But the pandemic has put pressure on the agreement and China's purchases of those goods has been lagging. The IMF warned that "tensions between the world’s two largest economies remain elevated on numerous fronts" as Beijing and Washington also lock horns over China's treatment of ethnic minorities in Xinjiang and Beijing's security clampdown in Hong Kong. China is still battling localised coronavirus outbreaks, but has largely curbed its spread, allowing most businesses including cinemas and hotels to reopen and domestic tourists to travel. The IMF expects the Chinese government to continue with its infrastructure spending to bolster growth through 2021. But it warned against investments in "dirty sectors" including coal, cement and steel that have led to an increase in China's carbon emissions that previously peaked in 2013. (With inputs from agencies)

China's economy to rebound, IMF predicts major growth

China's virus-hit economy has shrunk for the first time in decades. The world's second-biggest economy contracted by 6.8% due to the coronavirus outbreak.

Gravitas: China's economy has shrunk for the first time in decades

The economic shockwaves of the coronavirus could eclipse the 2003 Sars outbreak. China's economy is already witnessing disruptions. WION's Palki Sharma tells you how this situation could spill across the global economy.

Gravitas: Wuhan virus, The economic cost of the outbreak

China's 'new economy' is rapidly rising with a more balanced and sustainable growth rate thanks to its enhanced capabilities for innovation, according to a China Media Group (CMG) commentary published on Monday.

Innovation the powerhouse of China's economy

President Xi Jinping, battling a persistent downturn in China's economy, is trying to gird his rule by demanding absolute loyalty from the Communist Party and attacking officials who stifle his policies, according to a report from the Dow Jones Newswires made available to EFE Sunday.

In recent weeks, Xi has put members of the ruling party on notice. He summoned senior officials from across China to warn them about "major risks" to the world's No. 2 economy, reminding them to shoulder responsibility for solving problems.

His administration issued a slew of new party directives demanding "unity and concerted action." Last week, state media publicized that the rest of the party leadership submitted self-evaluations for Xi's review, in a recently revived ritual designed to portray him as the ultimate authority.

While Xi remains undisputedly in charge, party watchers say his maneuvers point to simmering disquiet within the government and political elite. Critics say the president's policies have failed to shore up the slowing economy, unnecessarily aggravated tensions with the United States and alienated many other foreign governments.

Meanwhile, they say, his insistence on control and threats to punish wayward officials are creating a policy muddle on the economy and sowing confusion in the bureaucracy.

"Xi does feel a sense of crisis" as he grapples with China's economic woes and bureaucratic resistance within the party, says Deng Yuwen, a former deputy editor of the Study Times, a newspaper published by Beijing's elite Central Party School. "From Xi's perspective, he believes his policies are correct but the problem is they aren't being implemented properly."

A test of Xi's authority will unfold over the next two weeks, when roughly 3,000 lawmakers gather in Beijing to review the government's economic blueprint for a year full of politically challenging anniversaries. While some, like the 70th anniversary of the People's Republic, are auspicious, several others are not, like the 30-year mark since the deadly suppression of the Tiananmen Square protests.

The annual sessions of the National People's Congress and a related government advisory body are largely set pieces of political theater, intended to show that the party is in control. Behind closed doors, the delegates, composed mostly of political notables from around the country, at times vent over government policy. Trade talks with the US, now set to stretch well into March, could also complicate matters as Xi seeks to curb dissent at the congress, which kicks off on Tuesday.

The atmosphere is a measure of how Xi's aura of dominance, if not his power, has receded over the past year.

Last spring, he appeared unassailable as China's leader, having emerged from a party conclave with unrivaled authority and cleared a path toward lifetime rule by scrapping term limits on his presidency. Concerns that he had concentrated too much power, fueled by fulsome state-media praise for his leadership, soon stirred criticism, exacerbated by slowing growth and trade tensions with the US.

A standoff of sorts has developed between Xi and some within the party's senior ranks. He hasn't convened the Central Committee – the party's nearly 380 most-influential members – for a meeting in a year, a delay that allows him to dictate policies without consulting the broader elite. In recent decades, the committee has regularly met in the fall to approve overall policy goals.

Instead Xi summoned the party elite together in late January for a seminar at the Central Party School, where he inveighed against "slackness in spirit" and "lack of ability" among officials. He warned them that allowing economic risks to go unaddressed could lead to social unrest and ultimately affect the party's standing.

"The going is getting tougher" for China to marshal its economic challenges, "which explains why Xi Jinping is focusing more on politics than economics," says Andrew Collier, managing director at Orient Capital Research, an independent research firm in Hong Kong. "China, as with most countries, is avoiding hard policy decisions and letting political infighting dictate who gets money in a time of scarcity."

The current economic downturn was partly brought on by Xi's policies. For the past two years, Beijing has prioritized curbing risks in the financial sector to stop the pileup of corporate and local government debt that threatens long-term growth. The clampdown on lending, however, rippled through the economy, driving up costs for many businesses at a time the growth cycle was already ebbing.

Now, Beijing wants to turn on the credit taps to boost growth. Xi's government has approved more infrastructure projects and urged bank lending to small and midsize private businesses. But doing so risks reigniting the risky borrowing and debt buildup Beijing has tried to control.

Tensions over the competing priorities surfaced at a February cabinet meeting, where Premier Li Keqiang, the titular No. 2 leader who has lost influence over economic policy to Xi, warned that recent stimulus measures could "bring new potential risks," citing a surge in short-term lending that led to record bank-loan growth in January.

His comments drew a rebuttal from China's central bank, whose official newspaper published an interview with an anonymous official who said the government wasn't engaging in "flood-irrigation" style stimulus and that seasonal factors contributed to the growth in short-term loans, which has helped small businesses.

Xi himself weighed in a day later, telling the Politburo – the party's top 25 officials – that officials should "pay attention to preventing risks on the foundation of stable growth." State media said he is signaling that Beijing can't allow the economy to decelerate as a result of de-risking – objectives that economists say are at odds.

"You can't deleverage or de-risk the economic and financial system and sustain elevated growth," said George Magnus, an economist and research associate at Oxford University's China Center. "This incoherence is a major problem and certainly an important contributor to the lack of confidence."

Xi has sought to cut through the bureaucratic inertia with new party strictures that boost his control. New regulations released last week require officials to keep their superiors informed and seek approval on "major matters," including the implementation of party edicts.

President Xi Jinping, battling a persistent downturn in China's economy, is trying to gird his rule by demanding absolute loyalty from the Communist Party and attacking officials who stifle his policies, according to a report from the Dow Jones Newswires made available to EFE Sunday.

President Xi Jinping, battling a persistent downturn in China's economy, is trying to gird his rule by demanding absolute loyalty from the Communist Party and attacking officials who stifle his policies, according to a report from the Dow Jones Newswires made available to EFE Sunday. In recent weeks, Xi has put members of the ruling party on notice. He summoned senior officials from across China to warn them about "major risks" to the world's No. 2 economy, reminding them to shoulder responsibility for solving problems. His administration issued a slew of new party directives demanding "unity and concerted action." Last week, state media publicized that the rest of the party leadership submitted self-evaluations for Xi's review, in a recently revived ritual designed to portray him as the ultimate authority. While Xi remains undisputedly in charge, party watchers say his maneuvers point to simmering disquiet within the government and political elite. Critics say the president's policies have failed to shore up the slowing economy, unnecessarily aggravated tensions with the United States and alienated many other foreign governments. Meanwhile, they say, his insistence on control and threats to punish wayward officials are creating a policy muddle on the economy and sowing confusion in the bureaucracy. "Xi does feel a sense of crisis" as he grapples with China's economic woes and bureaucratic resistance within the party, says Deng Yuwen, a former deputy editor of the Study Times, a newspaper published by Beijing's elite Central Party School. "From Xi's perspective, he believes his policies are correct but the problem is they aren't being implemented properly." A test of Xi's authority will unfold over the next two weeks, when roughly 3,000 lawmakers gather in Beijing to review the government's economic blueprint for a year full of politically challenging anniversaries. While some, like the 70th anniversary of the People's Republic, are auspicious, several others are not, like the 30-year mark since the deadly suppression of the Tiananmen Square protests. The annual sessions of the National People's Congress and a related government advisory body are largely set pieces of political theater, intended to show that the party is in control. Behind closed doors, the delegates, composed mostly of political notables from around the country, at times vent over government policy. Trade talks with the US, now set to stretch well into March, could also complicate matters as Xi seeks to curb dissent at the congress, which kicks off on Tuesday. The atmosphere is a measure of how Xi's aura of dominance, if not his power, has receded over the past year. Last spring, he appeared unassailable as China's leader, having emerged from a party conclave with unrivaled authority and cleared a path toward lifetime rule by scrapping term limits on his presidency. Concerns that he had concentrated too much power, fueled by fulsome state-media praise for his leadership, soon stirred criticism, exacerbated by slowing growth and trade tensions with the US. A standoff of sorts has developed between Xi and some within the party's senior ranks. He hasn't convened the Central Committee – the party's nearly 380 most-influential members – for a meeting in a year, a delay that allows him to dictate policies without consulting the broader elite. In recent decades, the committee has regularly met in the fall to approve overall policy goals. Instead Xi summoned the party elite together in late January for a seminar at the Central Party School, where he inveighed against "slackness in spirit" and "lack of ability" among officials. He warned them that allowing economic risks to go unaddressed could lead to social unrest and ultimately affect the party's standing. "The going is getting tougher" for China to marshal its economic challenges, "which explains why Xi Jinping is focusing more on politics than economics," says Andrew Collier, managing director at Orient Capital Research, an independent research firm in Hong Kong. "China, as with most countries, is avoiding hard policy decisions and letting political infighting dictate who gets money in a time of scarcity." The current economic downturn was partly brought on by Xi's policies. For the past two years, Beijing has prioritized curbing risks in the financial sector to stop the pileup of corporate and local government debt that threatens long-term growth. The clampdown on lending, however, rippled through the economy, driving up costs for many businesses at a time the growth cycle was already ebbing. Now, Beijing wants to turn on the credit taps to boost growth. Xi's government has approved more infrastructure projects and urged bank lending to small and midsize private businesses. But doing so risks reigniting the risky borrowing and debt buildup Beijing has tried to control. Tensions over the competing priorities surfaced at a February cabinet meeting, where Premier Li Keqiang, the titular No. 2 leader who has lost influence over economic policy to Xi, warned that recent stimulus measures could "bring new potential risks," citing a surge in short-term lending that led to record bank-loan growth in January. His comments drew a rebuttal from China's central bank, whose official newspaper published an interview with an anonymous official who said the government wasn't engaging in "flood-irrigation" style stimulus and that seasonal factors contributed to the growth in short-term loans, which has helped small businesses. Xi himself weighed in a day later, telling the Politburo – the party's top 25 officials – that officials should "pay attention to preventing risks on the foundation of stable growth." State media said he is signaling that Beijing can't allow the economy to decelerate as a result of de-risking – objectives that economists say are at odds. "You can't deleverage or de-risk the economic and financial system and sustain elevated growth," said George Magnus, an economist and research associate at Oxford University's China Center. "This incoherence is a major problem and certainly an important contributor to the lack of confidence." Xi has sought to cut through the bureaucratic inertia with new party strictures that boost his control. New regulations released last week require officials to keep their superiors informed and seek approval on "major matters," including the implementation of party edicts.

Xi Jinping works to stifle dissent amid concerns about China's economy

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