There are multiple internal issues facing the governing party in China. The continuing deflation forces racking the Chinese economy was brought on by the Chinese housing disaster. This is causing rising social unrest among the Chinese people. In addition, there is Xi’s fear of the Chinese military leadership, which is why Xi is currently remaking the leadership of the Chinese military with personnel whose main quality is being loyal to Xi.
Xi has ordered the construction of more than 200 detention centers for use against the Chinese people. These is a new directive mandating military training for high school and college students. These personnel would not be for foreign adventures, but for use against the people of China. And while he is doing this, he is isolating himself from the economic and political reality in China. A clear repetition of the types of absolute political power in China who holds the Mandate of Heaven, before the collapse of the central government in Chinese history and losing the Mandate of Heaven. With Xi imposing tighter political controls to maintain absolute political power, it would not be possible for Xi to relax this type of power. For in doing so. he would only hasten his own downfall. The current government in China is in a spiraling descent towards collapse. There is no way to stop this.
These multiple issues are an old story in Chinese history and typically precede the change of the “Mandate of Heaven.” But this time the change may be different. For the first time in Chinese history, an alternative developed political power center, that is ethnically related, is available. For the first time in Chinese history, the people of China have a high degree of education. It is possible Taipei might be able to appeal to the Chinese people in political disarray to coalesce under a coalition government on the island of Taiwan in the capital of Taipei.
Some scholars have wondered whether the population in Taiwan would be able to communicate with and understand the fears and anxiety of the mainland Chinese people in such a scenario. The demographics of Taiwan show that the major ethnic group of Taiwan is of the Han ethnicity. So, such an appeal for peace and stability should resonate with an educated population seeking these very things.
Social Unrest in China
In 2019 to 2023, the Chinese authorities recorded 3 to 5 social attacks among the Chinese people. In 2019 3 people were killed, in 2023 that figure jumped to 16 dead. In 2024 that number jumped to 19 attacks with 63 people killed by unprovoked attacks. These attacks were motivated by economic uncertainty as well as an expression of anger against the ruling Chinese Communist Party (CCP). While there is no one issue that dominates the uncertain economic future that China is facing, there are several issues coming to a boil, that may pertain the collapse of the current form of government that currently holds power in mainland China. Clearly, one of the major causes for the social unrest is the slowing Chinese economy.
The Chinese Economy is in a slow collapse.
The housing bubble in China began to develop in the year 2020. In the 1990s and in the aughts in the 21st a rapid way to create wealth in China was to buy a home. However, in the 2020s the real estate bubble began to form. Driven by a speculative environment as well as an increase in urban development, the CCP encouraged the purchase of homes to spur economic development. This mindset led to the false belief that property prices would continue to rise, which fed the speculative frenzy beyond sound economic practices. This frenzy of speculation has placed a great deal of pressure on the younger buyers. Typically, family wealth is used for the first downpayment of a new home. With the decline of property values, this is creating economic tension. In the second quarter of this year, economic growth was an anemic .07 percent. This was estimated to be 4.7% annual growth rate. In the third quarter, the Chinese economy slowed to a 4.6% annual growth rate. In the 4th quarter of 2004, the Chinese economy increased to 4.8%, still below the forecast of a 4.9% annual growth rate that had been forecast for 2024 by the CCP. While China announced a 5% growth in the last quarter of 2024, this has been met with a great deal of skepticism. The Chinese people have sharply cut back on expenditures because of the dramatic loss of wealth in the real estate market. Most Chinese individual and family wealth is tied up in their homes.
A Serious Threat of Deflation
By decreasing their consumption rate, the Chinese economy is flirting with a serious deflationary threat infecting the Chinese economy. While the People’s Bank of China (PBOC) has slashed interest rates, in a deflationary environment this is akin to pushing a thread. To escape a deflationary environment, the string needs to be pulled. Pushing on a string does not result in the expansionary desired results.
The CCP does not seem to understand this. The measures introduced so far will not be enough to overcome deflationary pressures. Until the CCP and the PBOC confront the failing real estate market with more direct measures, such as stimulating consumer demand, the Chinese economy will continue to deteriorate. To escape a deflationary economy, the CCP needs to increase demand in personal consumption. The current measures being taken will not accomplish this.
The hidden danger of using fiscal spending to re-ignite the Chinese economy is the overwhelming debt that the Chinese economy is currently saddled with. When all debts are considered, the total Chinese debt totals up to 300% of the Chinese national GDP. Too much currency in circulation could ignite serious inflationary pressures akin to the hyperinflation disaster at the end of the Weimar Republic in Germany.
The Demographic Decline in China
The Chinese downward spiral of China’s demographics is a drain on its economic power and magnifies the social unrest in China. While live births in China did increase in 2024, the population of China continued its downward path for 2024. After subtracting live births from Chinese deaths, the population of China declined by 1.39 million. According to the noted geopolitician Peter Zeihan, China’s demographics are so bad, that it would be impossible for China to recover.
There are Signs of Chinese Army Dis-satisfaction With Xi’s One-Man Rule
In a little noticed, but highly significant event, was a photo of Chinese PLA generals studying communist philosophy, under a banner which called for collective leadership. Xi can only interpret this as a challenge to his authority. This photo has since disappeared from the source of the photo.
Xi Jingping has been steadily replacing the top leadership of the People’s Liberation Army (PLA.) Xi’s purge of the top leadership began in July of 2023 with the disappearance of General Li Yuchao and his deputy several months ago. The replacement for General Yuchao is former deputy navy chief Wang Houbin and party central committee member Xu Xisheng. Both men were promoted to the full rank of general, which is the highest rank available in the PLA. In December of 2023, 9 PLA generals were relieved amid accusations of corruption in their respective commands. Since then, the pace of the removal (purge?) has only quickened, with more than 30 top generals being removed from their commands under charges of corruption. Xi personally chose the replacements of these generals. These new generals were noted more for their loyalty to Xi, than for their military leadership abilities.
There is only one China, and Taiwan is a part of China, but that does not mean that the center of political gravity needs to be in Bejing. The political capital of China could very well be in Taipei on the island of Taiwan.
