Professor Zhang Tianliang, a commentator on current political analysis, believes that the Chinese Communist Party (CCP) prepares for an inevitable economic downfall.
Speaking on the “Dawn Hour” [Political Theory World] program, Zhang viewed that the signs are apparent judging from the current events unfolding in China.
Mass layoffs—An evident sign of economic crisis
Conversations among workers around the end of the year have also changed. In previous years, the year-end bonus would be the main topic of discussion. Now, most worry whether they would be the next to get fired suddenly.
Internet giants in China are one by one mass dumping their employees, from iQiyi—a Chinese Netflix platform, to Kuaishou—a short-video platform, and Mogujie—a fashion e-commerce site.
Mogujie was listed at the end of 2018. At that time, its market value was about $1.5 billion. Currently, it is reported that it is planning to lay off 30% of its staff, and it’s not its first large-scale employee firing series. For example, a 14% layoff was made last April when 140 people were terminated.
While companies are letting go of most of their workforce, it should be noted that they were also not looking for new employees and would move forward with a limited headcount.
Professor Zhang derided Chinese President Xi Jinping for his economic strategies, citing a recent event when the country’s top live-streamer Wei Ya was targeted for tax evasion. As a result, she was fined more than $240 million, and all her social media accounts were shut down, along with her online e-commerce career being terminated.
As Zhang saw it, the CCP’s penalties on Wei lacked common sense, which showed China’s economic future was grim.
He said, “Without sales, the costs cannot be recovered, there is no way to reproduce if the costs are not recovered, and there will be no employment without production.”
As an influencer, Wei Ya can sell hundreds of units of one product in only seconds, streaming herself.
Zhang added, “After Xi Jinping defeated one industry [real estate] with a heavy blow, where is the new economic growth point? E-commerce has also been broken, education and training have also been broken, and many have been broken. Now Xi Jinping may have returned to the most primitive old path.”
Investment in infrastructure
The real estate sector, the Chinese economic pillar, is sending massive waves of aftershocks as it is falling. Among those experiencing it are local authorities’—affecting their ability to handle their debts.
Zhang elaborated, “China’s debt is already very problematic. This 1.46 trillion ($230 million) is allowed to increase local debt. In the past, many local authority debts were guaranteed by real estate. Now that real estate is not good enough, local authority debt can no longer be repaid.”
Xinhua News Agency reported that the CCP is looking to launch new infrastructure projects, allowing local governments to increase the debt limit of $230 million.
Xinhua News Agency said that this investment would become an essential driving force for investment growth and provide strong support for stabilizing the macroeconomic market.
But Zhang was less optimistic that expanding investment would make the economy better. He believed that Xi Jinping was only applying this method because doing so would be statistically better for the economy ahead of the 20th National Congress of the Chinese Communist Party. In reality, there might be little to expect.
Ning Jizhe, director of the National Bureau of Statistics of China, said in a statement two days ago that real estate is a pillar industry, meaning he knows that the development of some high-end sectors, such as new energy, chips, electric vehicles, etc., are no longer available.
Zhang noted that the CCP itself does not have much money even as the central bank cut a benchmark rate for the first time as real estate giants such as Evegrande are cash-strapped. This is reflected in the news about salary cuts for teachers and civil servants in many places.
Hoarding food supply
Zhang highlighted that the CCP has been importing and hoarding food supplies in large quantities.
The amount of food the CCP imports in a year is $98.1 billion, 4.6 times more than ten years ago. China buys soybeans, corn, and wheat from the U.S. and Brazil. In the past five years, such imports have increased 2 to 12 times; beef, pork, milk, dairy products, fruit, and more also increased two to five times.
The U.S. Department of Agriculture reported that China is now stocking 69% of global corn reserves, 60% of international rice reserves are in China, and 51% of wheat reserves are in China. China has also begun to import large amounts of grain in recent years.
Zhang gave two scenarios on why the CCP is doing so.
One, it is preparing for a food crisis on a global scale, which could come from the COVID-19 pandemic, which had already ignited shipping bottlenecks and currency devaluation worldwide.
Two, it stabilizes the society when China faces sanctions from other governments.
Zhang believed China was ready to do what Iraq did after the Gulf War when faced with international economic penalties.
He said, “at that time, Iraq implemented the oil-for-food program. After it hit Kuwait, the international community imposed an economic blockade on it, but the people did not starve to death. The oil-for-food programs allowed Iraq to export limited oil in exchange for some food. At that time, Iraq’s food was rationed by the government. Every month, the government gives out three things, like noodles, cooking oil, and eggs (or salt), to keep people from starving.”