As China’s economy sinks, Xi is selling nationalism in place of prosperity and is staking his rule on grabbing Taiwan, analysts say.
News Analysis
For four decades, the Chinese Communist Party (CCP) sold the people a false promise: leave the power to us and ask no questions, and we will make you richer than your parents could have imagined.
Living standards did rise—not because central planning worked, but because the Party loosened its grip on the economy. As the country was opened to the outside, access to Western capital, technology, and markets brought more wealth to the Chinese people—and the Party took all the credit.
Meanwhile, even as incomes climbed, the Party continued to jail critics, crush dissent, and persecute entire communities of ordinary citizens who wanted no part of politics. But for the compliant majority, rising living standards bought consent.
Now the money is running short. Growth is fading, prices are falling, jobs for the young are scarce, and the country’s wealthy are quietly moving their savings abroad.
So Chinese leader Xi Jinping is rewriting the deal, analysts told The Epoch Times. In place of the promise of getting rich, he’s offering the promise of getting even: the assurance that China has risen to stand as an equal of the United States, and that the long-deferred “rejuvenation” of the nation, including the absorption of Taiwan, is within reach.
Replacing the promise of prosperity with the promise of national greatness is the most consequential gamble in communist China today, said Sheng Xue, an award-winning Chinese Canadian journalist and author who has reported for Radio Free Asia and Deutsche Welle.
The Bargain That Is Breaking
The old deal had a name among China scholars: performance legitimacy.
“For a long time, the CCP’s legitimacy to rule has rested on performance legitimacy—the most important part being, ‘I’ve let you eat your fill, dress warmly, and live a better life,’” Sheng said.
In exchange, the Party “got more and more people to give up the political rights to participation and oversight that they ought to have fought for,“ she said. ”But now that the CCP’s economic growth has stalled—even declined sharply—that effect is wearing off.”
According to data from China’s National Bureau of Statistics, prices across the economy have been falling for the better part of three years—a deflationary spiral that Bloomberg Economics called China’s longest since the famine that followed Mao Zedong’s Great Leap Forward in the early 1960s.
Sustained deflation can feed on itself: As prices fall, companies cut wages and jobs, households delay purchases in expectation of cheaper prices later, and debts grow heavier.
Much of the cause lies in housing. The property crash has erased an estimated $18 trillion in household wealth, leaving families poorer and afraid to spend, according to Bloomberg, citing Barclays calculations.
In April, youth unemployment stood at 16.3 percent—and that figure counts only 16- to 24-year-olds who are not students. That intentional underestimation was adopted by Beijing in 2023 after the previous measure hit a record 21.3 percent, causing officials to abruptly stop publishing it for half a year. Around that time, Peking University economist Zhang Dandan drew national attention by estimating that the true rate could be as high as 46.5 percent.
The population is shrinking, too: Births fell 17 percent in 2025 to 7.92 million, the fewest since Beijing began counting in 1949, while the share of Chinese aged over 60 reached around 23 percent.
University of Wisconsin–Madison demographer Yi Fuxian noted that China recorded roughly as many births last year as it did in 1738, when its population was about 150 million.
Many ordinary Chinese feel the squeeze directly.
“Income is down, property has lost value, and my sense of security has fallen,” said a woman in her 50s in the northeastern city of Harbin—one of several residents The Epoch Times interviewed but will not be naming for their safety. “The lack of security comes from the yuan losing value.”
A man in his 50s in the port city of Dalian put it more bluntly: “At home, just being debt-free makes you a big shot.”
By Sean Tseng
