Bundled with both, growing unemployment and an economic slowdown, Beijing’s economic recovery ambitions have further been dampened due to multiple factors, including the after effects of the pandemic as well as the ongoing real estate crisis. With the Communist Party of China (CPC) declaring the target of creating 12 million urban jobs as well as seeking to maintain a 5 percent GDP growth rate during the National People’s Congress, it is highly likely that such over ambitious objectives are further going to shake investor confidence in the country’s economy.

On the other hand, the success stories of India and other Southeast Asian countries have also reinforced trust within specific markets as well as projecting them as viable alternatives, enabling greater investment opportunities in these countries. With global indicators all but weighing with India and Southeast Asia, China’s Asian economic supremacy that it held for over a decade, is all but crumbling.

On India’s part, it has undertaken major economic reforms in the past decades in order to liberalize markets as well as deregulate industries to attract foreign investments. On the other hand, China, in order to divert attention from its internal economic crisis, has stopped publishing unemployment data sets to prevent further panic among investors and the public. Moreover, further making the situation worse, one of China’s largest real-estate firms Country Garden, along with a few prominent investment banking companies including the Zhongrong Trust have defaulted on its loan repayment causing even further panic within the market. Zhangrong Trust had recently failed to repay debt on several of its investment products with the amount exceeding 110 million yuan. The investment firm at present manages over $87 billion worth of funds for corporate firms and individuals and is considered to be one of thousands of wealth management firms that are facing the perils of a declining Chinese market.

The case of Country Garden, in specific, is being seen by many economists as an exemplifier of Beijing’s declining economic trajectory. With reports from a few months ago suggesting that the company abruptly pulled away from raising $300 million through new shares, the fall of one of China’s largest real estate developers and investors has nonetheless been eminent.

In all these declining indicators, the Chinese government has however remained silent and lackluster in its approach to mitigating against the economic challenge. The lack of resolute measures to stimulate domestic demand and quell fears against the onset of economic challenges has invariably led to new rounds of economic instability, causing downgrades in ratings and retraction of foreign capital.

Factors highlighting CPC’s economic policy shortcomings

Among the declining economy and systemic weaknesses, the lack of various mitigating measures has invariably highlighted the shortcomings of the CPC in its economic management policies. To begin with, the Party’s overreliance on investment-led growth has ultimately proven to be unsustainable. The focus on prioritizing infrastructure projects and fixed-asset investments to drive economic expansion has resulted in a state of stagnation for its economy. Although the strategy fuelled temporary rapid growth, it has nonetheless resulted in overcapacity and souring debt, especially in the real-estate sector where ghost cities and empty highways have become a prominent sight.

This economic expansion at the cost of fuelling debt has resulted in risks and vulnerabilities within its financial system, thus leading to investor and capital retractions from China’s economy. The emergence of shadow banking activities (led by Zhongrong Trust) and extreme local government debt have raised doubts over the growth targets estimated by the Chinese Premier throughout the course of the Two Sessions as well. As a result, this has also caused concerns for China's financial markets, with many analysts predicting recurring stock market shocks with consequential effects. Secondly, the CPC's state-led model of economy has majorly hindered market-driven reforms, resulting in restrictions and control over crucial sectors. The party also infamously exerts influence onto the market through state-owned enterprises (SOEs) thereby also stifling competition while restricting the flow of capital resources. All these factors coupled with disappointing numbers are certainly signaling an economic crash never before seen in China’s modern history.

Different approaches to global economic turmoil

Within the realm of global economics and especially more so within Asia, India and China stand out as two powerhouses with vastly different approaches and subsequent outcomes. Although both countries have experienced growth and transformed significantly, their responses to economic turmoil have differed leading to contrasting economic trajectories. While one could consider China’s much hyped economic growth as hyped and over-producing, India has been deemed by many to be far more stable and reassuring in its economic policies. China's over emphasis on SOEs along with export-oriented manufacturing has in the long term caused economic disasters, one of which is being witnessed presently. India however, has proven to be a stable economic powerhouse that has guaranteed consistent returns to its investors with exceptional growth over the past few years. By embracing market-oriented reforms New Delhi’s economic story has positioned itself as democratic and market-oriented economy that has catered significantly to its own people as well through welfare schemes. Conversely, the CPC’s inability to maneuver against economic turmoil including the real-estate crisis looming large for over two years as well as the after-effects of the pandemic, outlines the drawbacks of its state-led economic model. With several major investment banks cutting their forecast rating on China and focusing majorly upon India and other Southeast Asian countries, it is only time before the much-hyped story of China’s exceptional economic growth will soon dwindle under its own misgivings.