China has been teetering on the precipice of an economic crisis for quite some time now. Structural issues within the country’s financial system and the protracted lockdowns of essential hubs, ports and even entire provinces resulted in supply chain disruptions, slowed economic growth and generalized unrest throughout the country. And because economic vitality is the basis of the Communist Party of China’s power, these circumstances pose a threat to government stability. Until now, President Xi Jinping has managed to consolidate power such that he could remain China’s ruler for life. But his failure in navigating new challenges has put his leadership in doubt, particularly in the circles that truly matter: the rest of the CPC, of which there are two factions with two distinct views on China’s future relationship with the rest of the world, particularly the West.

Driving Growth

When China’s position as an economic powerhouse was secure, so was Xi’s position. The economy was always predicated on exports, and though Chinese leaders have made every effort to transition to a consumption-based economic model, manufacturing and exports still drive Chinese gross domestic product. This has made it especially vulnerable to global disruptions of supply chains caused by the Russian invasion of Ukraine and the COVID-19 pandemic, but structural issues such as shadow lending, increased intervention in market affairs, dependence on imports and financial difficulties in the real estate sector have been a problem for some time, as has the economic disparity between the wealthy coastal regions and the underdeveloped interior. Extremely strict regulatory measures brought on by the omicron strain of COVID-19 have only made things worse. Internal economic disruptions, the forced halt of key industries, rapidly surging prices, and food and fuel shortage have led to growing unrest within Chinese society.

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