Last Updated:2018-12-18
This year may well go down as a defining one for President Xi Jinping's leadership
– one that marks the beginning of the end for the "President for Life". Xi began
the year in full command of the country, seemingly ascendant on the world stage with his signature Belt and Road Initiative and, in the face of President Donald Trump's unilateralism, a new champion of the multilateral trading system and defender of the WTO and other features of the fast-receding liberal multilateral order.
The economy continued to grow strongly. He had prevailed at the Nineteenth Party Congress towards the end of 2017, having "Xi Jinping thought" inscribed in the party's constitution, unusually while still serving in office. At the National People's Congress in March, he had the two five-year fixed terms for president abolished so he could stay in the role as long as he wished.
Xi dealt China back into the centre of North Korean affairs, after the unpredictable and disruptive Trump stole a march on China by re-establishing direct contact and agreeing to a head-of-state meeting. Kim Jong-Un made two visits to Beijing in quick succession. China was again the key influencer of the pace and direction of change on the Korean Peninsula.
But by year's end, Xi is under pressure on at least four fronts.
Under the twin influence of the government's
own, and necessary, efforts to deleverage domestic debt, and the US trade measures against China, growth appears to be weakening. In the year to November, retail sales and industrial production are both down slightly on the same period last year, and fixed-asset investment and property sales are flat. Commendably, the government
seems to be resisting, at least for the time being, stimulating the economy.
Falls across the economy
Tellingly, vehicle sales in November were down 14 per cent from a year earlier and have been falling by similar amounts for the past three months. According to China's automobile association, retail sales of vehicles are expected to fall 3 per cent this year, the weakest performance since 1990 (the year of China's last recession following the violent suppression of the 1989 protest movement).
Foreign direct investment in China has also fallen throughout this year. For the year to
November, it was down 1.2 per cent compared with the same period last year.
Although a single month's figure may be influenced by a number of random factors, in
November alone foreign direct investment in China fell 27.6 per cent.
Wishing to avoid public disquiet over the trade war with the US, China's state- controlled media is avoiding reporting on its negative implications. Meanwhile, Guangdong, the most exposed province, has stopped publishing certain provincial- level economic data. Guangdong's Purchasing Managers' Index (PMI), a key indicator of industrial activity, was not published for October. It had been falling over the past few months. It is probably the most accurate indicator of the direct effect of the trade war with the US as Guangdong has a concentration of companies exporting to the US. According to Nikkei, the number of loss-making manufacturing firms in Guangdong rose by 19 per cent in the year to November, compared with the same period last year.
Early signs would suggest, as many predicted at the outset, that the US is getting the better of the trade war with China.
