1 Beijing grasps at straws in trying to fix economy, ascertain US intentions
Beijing continues talking up the economy
Li Qiang speaks at key forum
March 23
PRC premier Li Qiang attended the opening ceremony of the 2025 China Development Forum and delivered a keynote speech.
In his speech, Li talked up the Chinese economy from three angles:
i) China’s developmental vitality should be viewed through the lens of the “Spring Festival Economy,” or the positive trends that emerged around the time of this Chinese New Year period. This includes:
- The booming demand in sectors like film, winter tourism and sports, and cultural tourism. Li said this showcased the “immense potential of China’s domestic economic cycle.”
- The wave of technological breakthroughs led by so-called “Hangzhou Six Little Dragons” (DeepSeek, Game Science [developer of the hit computer game, “Black Myth: Wukong], X-Kool Tech [tech start up that applies AI solutions to architectural designs and urban planning], Neuracle Technology [tech company specializing in brain-computer interface technologies] and Yunshen Technology [robotics company]) and other startups. Li said these innovations demonstrate China’s “strong momentum in technological advancement and creative development.”
ii) China’s economic policies should be understood through the Two Sessions. Li said that Beijing’s economic growth target of 5 percent for 2025 reflects the CCP authorities’ “deep understanding of the fundamental conditions of the Chinese economy” and firm confidence in its own governance capabilities and future development potential.
iii) Global progress should be considered from the perspective of international changes. Li said that “instability and uncertainty are on the rise” in “today’s increasingly fragmented world.” He added that the PRC remains committed to integrating its development with global development, will practice “true multilateralism,” resist “unilateralism and protectionism,” and achieve greater development through mutual benefit and reciprocity.
Propaganda outlets promote Xi Thought on the economy
March 24
1. State broadcaster China Media Group and the National Development and Reform Commission jointly produced a 14-episode special program titled, “Xi Jinping Economic Thought: A Series of Lectures and Readings” (習近平經濟思想系列講讀).
According to state media reports, the special program features senior economic officials, experts, and scholars speaking about “Xi Jinping Economic Thought” in a studio format. The program is divided into four sections, namely, “Questions of the Era,” “Policy Study,” “The Power of (Xi Jinping) Thought,” and “Learning, Thinking, and Practicing.” Through over 100 grassroots case studies and analysis from more than 40 case observers, the program seeks to “vividly explain” the “core essence, rich connotations, and practical requirements of “Xi Jinping Economic Thought” to encourage Chinese society to actively apply these principles to “solve problems and carry out work.”
2. Party mouthpiece People’s Daily published a series of articles by the CCP Central Committee’s Institute of Party History and Literature on studying the “Selected Works of Xi Jinping on the Economy.” The first article in the series, “Deeply Study and Implement Xi Jinping Economic Thought to Ensure China’s Economic Ship Sails Steadily and Bravely Forward” (深入學習貫徹習近平經濟思想，確保我國經濟航船乘風破浪、行穩致遠), was nearly 9,200-characters long.
The article notes that the recently published first volume of the “Selected Works” compiles 74 of Xi’s “most significant and fundamental” writings on economic development. The article describes the “Selected Works” as a faithful record of how Party Central with Comrade Xi at the core “grasped major trends, planned the overall situation, and implemented concrete actions” to steer the PRC’s economic development. The article added that the “Selected Works” had “scientifically summarized” the “valuable practical experience” of promoting economic development in the new era and systematically reflects the “rich connotations, scientific framework, and original contributions” of “Xi Jinping Economic Thought.”
Signs of economic weakness in China
Return migration wave
Numerous videos recently circulating on Douyin and other short-form video platforms show large numbers of unemployed workers heading back to their hometowns in several manufacturing hubs. Observers say that China is experiencing its first “return migration wave” of 2025.
Unemployment hits new high
March 17
The National Bureau of Statistics released economic data for the January-February 2025 period. Per the data, the average nationwide urban surveyed unemployment rate was 5.3 percent for the first two months of the year and 5.4 percent for February alone, marking a two-year high.
Industrial growth slows
NBS data from March 17 also showed that the value-added output of industrial enterprises above a designated size increased by 5.9 percent from a year ago during the January-February 2025 period. This was lower than the 6.2 percent year-on-year growth rate in December 2024 and the 7 percent growth rate for the January-February 2024 period.
Tax revenue drops
March 24
The PRC Ministry of Finance announced that the general public budget revenue for the January-February 2025 period was down 1.6 percent from a year ago to 4.3856 trillion yuan. In breaking down the figure:
- Tax revenue was down 3.9 percent year-on-year to 3.6349 trillion yuan.
- Non-tax revenue was up 11 percent year-on-year to 750.7 billion yuan.
- The fiscal deficit was 124 billion yuan, compared with a surplus of 96.1 billion yuan in the same period in 2024.
Beijing requires compliance with trade policies
March 21
The State Council General Office issued an opinion on further strengthening trade policy compliance work (關於進一步加強貿易政策合規工作的意見).
The Opinion required that trade policies formulated by State Council departments, as well as local governments at or above the county level, undergo compliance assessments to ensure that they align with World Trade Organization rules and China’s accession commitments.
The Opinion also stressed that the CCP authorities will “supervise and rectify” failure to carry out compliance work as required, and those responsible for not conducting compliance assessments or causing negative consequences will be held accountable in accordance with laws and regulations.
Beijing considers limiting exports
March 21
The Wall Street Journal reported that Beijing is considering adopting Japan’s model of voluntary export restraints, especially in sectors of key concern to Washington like electric vehicles and batteries, to ease trade tensions with the United States.
Advisers to the PRC authorities told the Journal that Beijing could also consider negotiating export restraints on batteries and electric vehicles in return for investment opportunities in those sectors in the United States.
Our take
1. Premier Li Qiang’s speech to the 2025 China Development Forum and Beijing’s promotion of “Xi Jinping Economic Theory” are the CCP’s latest efforts to “spin tragedy into victory” and mask China’s increasingly noticeable economic decline. For instance, Li indirectly blames China’s economic problems on the rising “instability and uncertainty” in “today’s increasingly fragmented world” while asserting that only the CCP “deeply understands the fundamental conditions of the Chinese economy” and can turn things around.
CCP propaganda outlets have also repackaged the economic difficulties caused by Party-led economic policies as being part of Xi Jinping’s “extraordinary journey in successfully steering China’s economic development.” Meanwhile, “Xi Jinping Economic Thought” is branded as being able to provide “valuable practical experience for promoting economic growth” and should be used by Chinese society to “solve problems and carry out work.”
The CCP’s push for the nationwide study and application of “Xi Jinping Economic Thought” has the potential to worsen rather than improve things for Beijing. If officials take the propaganda at face value, they will act on the premise that the Chinese economy is thriving and produce overly optimistic or unrealistic policies. Enterprises could also make business decisions that do not align with the economic reality and find themselves in deeper trouble. On the flipside, officials and business executives who have a better grasp of China’s actual economic situation but are afraid to offend the Xi leadership will outwardly conform to Beijing’s rhetoric, reporting only positive news while covertly acting against the central government’s directives. The end result is more policy missteps and failures, and greater economic disorder
2. The “return migration” wave in March is a troubling development for Beijing. Typically, migrant workers will travel to the cities to look for work after the Chinese New Year holiday period and stay in those cities for an extended period. Therefore, their quick return to their hometowns hints at sluggish economic activity and higher levels of unemployment than the official figures indicate.
Rising unemployment aligns with the slower industrial growth and declining tax revenue that China is seeing.
3. Beijing’s move to strengthen trade policy compliance work and possibly limit China’s exports to the U.S. signals that the Xi leadership is feeling immense pressure from the Trump administration. To avoid the possibility of being excluded from Western markets, Beijing is looking to rectify compliance issues and align itself with WTO rules while adjusting its trade strategy.
Meanwhile, Beijing’s reported plan to voluntarily restrict exports suggests that it does not fully grasp the Trump administration’s intentions and interests, and does not quite know what concessions it can make in exchange for some trade stability. Uncertainty over what Trump wants is impeding Beijing’s policy-making as the Xi leadership cannot properly gauge how much it can risk to hedge or how much ground it can concede.
Instead of “grasping major trends, planning the overall situation, and implementing concrete actions” to steer the PRC’s economic development, the Xi leadership is at risk of forcing superficial compliance, fostering internal resistance, and growing the disorder in China’s economy with its current approach to economic matters.
2 Rumors of high-level military purges continue to circulate
More senior PLA officers being probed?
March 24
1. Zhao Lanjian, a former Chinese citizen journalist currently residing in the United States, wrote on X that newly appointed People’s Liberation Army Rocket Force commander Wang Houbin was allegedly placed under investigation on March 22. Zhao believes that Xi Jinping is using tough measures to purge dissenting forces within the military and further consolidate his personal power. Zhao speculated that more senior military leaders could be purged in the near future.
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After Central Military Commission Political Work Department director Miao Hua was purged in December 2024, rumors started circulating that both Wang Houbin and defense minister Dong Jun had been questioned by the Central Commission for Discipline Inspection and the CMC Discipline Inspection Commission regarding their ties to Miao.
However, both Wang and Dong later attended CMC meetings, which suggested that the rumors of them being in trouble were questionable.
2. Overseas Chinese self-media commentator Cai Shenkun claimed on his show that CMC vice chairman He Weidong is “definitely in trouble” and that theater-level commanders have already been briefed internally on the matter.
March 25
Cai Shenkun claimed that PLA Eastern Theater Command commander Lin Xiangyang was taken away for investigation by the CMC disciplinary commission on March 24. Cai added that the preliminary charge against Lin is that he leaked so-called “Taiwan Strait combat plans,” and both He Weidong and Lin Xiangyang were key figures responsible for Taiwan Strait military planning.
Cai speculated that Xi’s ongoing military purge is aimed at consolidating absolute control and eliminating potential obstacles ahead of the Fourth Plenum of the 20th Central Committee.
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The PLA Eastern Theater Command oversees military forces in Jiangsu Province, Shanghai, Zhejiang Province, Anhui Province, Jiangxi Province, and Fujian Province, with operational jurisdiction over the East China Sea and the Taiwan Strait. The military command has participated in multiple military actions targeting Taiwan, including circumnavigation flights and large-scale military drills.
Meanwhile, Lin Xiangyang’s last public appearance appeared to be the March 14 symposium in Beijing marking the 20th anniversary of the Anti-Secession Law. CCTV’s prime-time show Xinwen Lianbo showed Lin in attendance at the symposium.
MSS ‘subtle criticism’ of Xi actually part of power games?
March 24
Yuan Hongbing, an Australia-based Chinese dissident and jurist, told Dajiyuan (Chinese language edition of The Epoch Times) that a recent Ministry of State Security article on the Han Dynasty and economic security that overseas Chinese commentators have speculated was a subtle criticism of Xi Jinping is actually a power play by the Xi camp, citing mainland sources.
Yuan claimed that Taiwanese leader William Lai Ching-te’s labelling of the PRC as a “foreign hostile force” in a speech on March 13 had caused “significant turmoil” in the CCP. He added that the group of “second generation reds” who gather around Deng Pufang (Deng Xiaoping’s son) and Chen Yuan (Chen Yun’s son) believed that Lai’s speech presented an opportunity for Xi to take military action against Taiwan. The group believed that:
- Dismantling Xi’s growing intelligence apparatus under peaceful conditions is going to be very difficult.
- Without major turmoil, there is fundamentally no way to remove Xi through a military coup or other forms of palace intrigue.
- They have a consensus of supporting Xi if he wants to attack Taiwan because they believe that Xi’s “one-man dictatorship” would face an existential crisis as soon as he moves on Taiwan.
Yuan claimed that Xi’s intelligence apparatus quickly reflected the above discussions to him and in response, Xi instructed his close ally Chen Yixin to assemble scholars to draft and publish the MSS article. Yuan alleged that the underlying message of the MSS piece was, “I, Xi Jinping, am temporarily ignoring William Lai’s remarks and not responding militarily — not because I lack resolve, but because I am prioritizing economic and social stability.” Therefore, the article was not an implicit critique of Xi Jinping but a severe warning to the Party princelings like Deng Pufang and Chen Yuan that Xi is aware of their intentions and will not tolerate dissent.
Our take
The various political rumors above cannot be independently verified. However, their circulation reflects that intra-faction rivalry remains tense in the CCP elite even as official propaganda and developments in the regime indicate that Xi Jinping’s grip on power is secure.
1. The CCP authorities have not issued any statements regarding investigations into senior military officials like He Weidong and others who are rumored to be purged. That being said, it cannot be completely ruled out that some senior military officials have been quietly targeted amid sweeping anti-corruption investigations.
Some signs that emerged near the end of this year’s Two Sessions and after that are much more reliable than the rumors circulating outside China in hinting that Xi Jinping is in the process of rooting out lingering factional enemies and “rectifying” the military:
- Politburo Standing Committee member Zhao Leji was absent from the closing session of the National People’s Congress at the Two Sessions, a very unusual development. In analyzing the possible political implications of Zhao’s “absence,” we noted that he could have been placed under investigation or Xi had deliberately left him out of the meeting to send a cautionary political message to his factional enemies.
- The Xi leadership moved swiftly after the Two Sessions to reinforce ideological control over the Party, the government, and the military.
- Xi Jinping inspected a regional military unit without the presence of a CMC vice chairman. In analyzing the possible reasons for this somewhat unusual development, we noted that the military leadership could be preoccupied with sensitive rectification and ideological reinforcement efforts to eliminate the “lingering poison” in the senior officer ranks.
2. If the rumor that CMC vice chairman He Weidong has been placed under investigation and theater-level commanders have already been briefed on the matter is accurate, then an official announcement could be imminent. This is so as the information would become nearly impossible to conceal once such internal briefings take place.
3. The rumored investigation of PLA Eastern Theater Command head Lin Xiangyang for allegedly leaking “Taiwan Strait combat plans” is highly suspect. For one, Lin has no obvious incentive for leaking classified military battle plans. As a theater commander and general, Lin is kept under tight surveillance by the CCP authorities and would have few opportunities to leave China, much less transfer valuable military intelligence abroad. Also, the privileges Lin and his family receive from the state likely far outweigh any potential benefits he could receive from partaking in espionage, while Lin would face enormous risks were he to be caught leaking state secrets.
If Lin had indeed leaked sensitive military plans, the CCP would almost certainly not acknowledge such an incident publicly even if he were officially investigated. However, “anti-Xi” forces could exploit the purge of Lin to spread even more rumors and feed the speculation about growing internal turmoil in the regime.
4. Yuan Hongbing’s “insider information” about how the MSS article on the Han Dynasty and economic security cannot be independently verified and is of unknown accuracy. However, the notion that Xi’s enemies want to push him into attacking Taiwan is very plausible because the idea that Xi Jinping can only be undermined via a “humiliating defeat in a war,” and particularly in a failed attempt to invade Taiwan, has been floated about in recent years.
We believe that the effort by “anti-Xi” forces to pressure or “trick” Xi into taking Taiwan is not likely to work. Barring extraordinary and extreme circumstances, Xi will not follow the “schedule and strategies of others, but will instead stick to his own timetable and methods” on the Taiwan “reunification” question.
