July 10, 2024 MEMRI Daily Brief No. 622

With Chinese Economy On The Brink Of Crisis, President Xi May Open Up Economically, But Become More Totalitarian

July 10, 2024 | By Chris King*
China | MEMRI Daily Brief No. 622

On June 24, 2024, China's Ministry of Finance released national fiscal revenue and expenditure data for the first five months of this year.[1]

Data is the most telling, even if it is data released by the CCP authorities themselves, which is often falsified. But if we compare this set of data with that of 2023, and especially with that of 2019, pre-COVID, it still shows the bleak outlook and serious problems of China's macro economy, which cannot make anyone feel optimistic.

To be specific, from January to May of 2024, China's general public budget revenue totaled 9,691.2 billion yuan, down 2.8% year on year. The decline was not large, but several key tax revenue items have either fallen sharply or continued to fall. They include domestic value-added tax (VAT) and enterprise income tax, which reflect the operating status of enterprises; individual income tax, which reflect the income status of individuals; stamp duties, which reflect business activity, and the stamp duties on securities transactions, which reflect capital market activity.[2]

In the first five months of 2024, domestic value-added tax and individual income tax revenue fell by 6.1% and 6% year on year, respectively. Stamp duty revenue fell 18.6% year on year, with stamp duty revenue from securities trading plummeting 50.8% compared with the same period last year.

(Source: X)

Data January-May 2023

For comparison, the data for January-May 2023 look like this:

From January to May 2023, China's general public budget revenue totaled 9,969.2 billion yuan, up 14.9% year on year. (This year, it is down by 2.8%, so that's a big difference from last year.)

From January to May of 2023, the domestic value-added tax revenue increased by 93.5% year-on-year. (That's a far cry from the 6.1% year-over-year decline in 2024.)

In addition, personal income tax revenue fell by only 1.5% last year, although the year-on-year figures for the January-May period have declined for two consecutive years, this year's decline is clearly steeper.

Stamp duty revenue in 2023 decreased by 14.6% year-on-year, of which stamp duty revenue from securities transactions decreased by 36.9% year-on-year. (The decline in stamp duty and securities transaction stamp duty revenue from January to May 2023 compared with 2022 is not small, but the situation in 2024 is obviously even worse.)

Data January-May 2019

Take a look at the data from January to May 2019, before the pandemic:

In the first five months of 2019, China's national general public budget revenue reached 8,991.9 billion yuan, an increase of 3.8% year-on-year. Domestic value-added tax revenue increased by 6.8% year-on-year, corporate income tax revenue increased by 9% year-on-year, and stamp duty revenue increased by 5.4% year-on-year. Stamp duty revenue from securities transactions rose 14.7%.

Thus, what a huge difference and contrast.

China's Economic Growth Will Come Under Severe Pressure In 2024

Through the comparison of the above data, some preliminary conclusions can be made:

1. The above three sets of data are consistent with our long-term daily observation, as well as the feelings and judgments of many economic experts, entrepreneurs, and research institutions in China and abroad. That is to say, on the whole, Chinese enterprises are in an extremely harsh situation, as can be seen from the rate of VAT reduction.

2. Judging from the continuous decline of personal income tax revenue, and especially the sharp year-on-year decline in the first five months of this year, overall the personal income of a considerable number of Chinese people has not improved this year, but has continued to deteriorate.

3. As can be seen from the continued decline in stamp duty revenue, business and capital market transaction activity was already shrinking in 2023, and they have has continued to shrink so far this year.

4. Combining the above three aspects, we can conclude the following two points:

  • China's economic growth will come under severe pressure in 2024. To achieve the 5% GDP growth target, more efforts must be exerted in the second half of the year.

  • The employment situation is bound to be grim this year. Businesses are having a hard time, business activity continues to shrink, and employment is unlikely to be good.

This is the basic picture of China's macro economy at present.

As for the huge amount of local government debt, the near collapse of the real estate market, and sluggish consumer demand, we have yet to analyze these in detail.

The Chinese People Will Face Further Incarceration And Poverty

In this context, it is understandable why the Third Plenum of the 20th CCP Central Committee, with the economy as the main topic, has been delayed.

After nearly a year's delay, the Communist Party's top brass finally decided and announced on June 27 that the Third Plenary session of the 20th Central Committee would be held in Beijing from July 15 to 18, 2024.

According to the press release, the theme of the meeting is "to study the issue of further comprehensively deepening reform and advancing Chinese Modernization."

This shows that Xi Jinping, under the pressure of continued economic recession and decline, had to bow his head and really did not have the face to hold the Third Plenary session at the usual time.

Many wonder whether the Third Plenary Session of the 20th CCP Central Committee will be a breakthrough reform meeting like the Third Plenary session of the 11th CCP Central Committee 46 years ago, given the enormous internal and external pressures facing China today.

My analysis is that Xi will take a more free-market economic approach and socialist political approach to set the tone for this meeting and for the party's governance for some time to come. But this paradoxical grafting is a mission impossible, because political totalitarianism will certainly lead to the authorities' intervention and control of the economy, hinder the free development of the economy, hinder the innovation and upgrading of productive forces, and eventually lead to the apparent equalization of economic income and the further concealment and spread of corruption by the ruling group. Economic liberalization is bound to form and solidify numerous interest groups, thus affecting and impacting the power of the totalitarian system, which will lead to intensified political and social contradictions and even turmoil.

In the long run, such divergent political and economic policy approach almost certainly condemn the ordinary Chinese people to further incarceration and poverty.

Running Towards A Super-Totalitarian Regime

In a previous article, I analyzed how Xi Jinping has always wanted to own the legacies of both Mao Zedong and Deng Xiaoping.[3] The reason why he still holds the supreme power in China today is actually because he has enjoyed the fruits of China's reform and opening up.

The Chinese economy is so large that there is a lot of room to move, which is what Beijing says – that the Chinese economy has a "strong" inherent self-generating power, so there are always some economic growth points. For example, in the first quarter of 2023, China surpassed Japan for the first time to become the world's largest auto export country. That year, China's auto production and sales exceeded 30 million for the first time, of which electric vehicle sales accounted for more than 60% worldwide.

However, this does not mean that the Chinese economy can continue to withstand Xi's irresponsible behavior. In particular, the terrible experience of the epidemic in the past three years has made the Chinese people, the economic community, and the world's major economies lose trust and fear in his rule.

The CCP's main source of legitimacy has been the rapid economic growth of the past four decades. Without this support, the party's rule would be at risk.

In this grim situation, Xi's economic policy is likely to make promises to safeguard the private economy, further open the Chinese market to the U.S. and the West, and ease or even remove restrictions on foreign investment ownership to further stimulate fertility. It will  likely provide more unilateral visa-free openings for more foreigners coming to China, in the hope of attracting more foreign investment and foreign tourists. But these are obviously unattractive.

Politically, Xi Jinping, who has always been uneasy about the security of the regime, will further carry out round after round of purges within the party, and further control every aspect of Chinese society, running towards a super-totalitarian regime, even more totalitarian than Mao.

In the run-up to the Third Plenum, the party has already expelled two previous defense ministers (Gen. Li Shangfu and Gen. Wei Fenghe)[4] who are suspected of serious corruption. Both military leaders were once trusted and promoted by Xi. This is clear proof that Xi is carrying out a big purge in the party.


For 40 years, from the end of 1978 to March 2018, when Xi Jinping amended the constitution to seek permanent power, the Communist Party could be described as an authoritarian regime with slightly loosened political and social controls. The Chinese people enjoyed a certain degree of freedom, and state capitalism by oligopoly could exist under this system.

Under the current totalitarian system that controls the whole society, however, China cannot even achieve state capitalism. It can only continue to slide into a situation in which tight political control and economic openness cannot coexist – leading to the eventual failure of the Communist Party's totalitarian rule.

*Chris King is Senior Research Fellow for the MEMRI Chinese Media Studies Project.


[1], June 24, 2024.

[2], June 24, 2024.

[4], June 27, 2024.

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