Xi Jinping's Ambitions Are Trapping China's Economy

• 14.10.2026, 10:56

Many investments turned out to be ineffective.

Chinese President Xi Jinping’s ambition to turn the country into a technological and military superpower is leading to a growing debt problem. Chinese authorities are pouring massive amounts of money into manufacturing, infrastructure, and strategic industries, but a glut of goods and weak domestic demand are holding back the economy, writes The Wall Street Journal (translation by Charter97.org).

According to the Bank for International Settlements, total loans to Chinese companies, the government, and households exceeded 300% of GDP last year. Since the end of 2019, the figure has risen by 60 percentage points, and since Xi came to power in 2012, the debt burden has increased by more than $43 trillion.

Many investments have proven ineffective. Companies are producing more cars, solar panels, and electronics than Chinese consumers can afford to buy. Manufacturers are trying to compensate for this through exports, fueling trade conflicts with other countries. As a result, China’s trade surplus with the rest of the world has reached $1 trillion a year.

Companies linked to local governments have accumulated particularly serious problems. For years, they borrowed money to build housing and sustain economic growth, but after the real estate market crisis, they were left with enormous debts and unprofitable projects.

“The most likely scenario is a gradual deterioration of the situation and a slow breakdown of the financial system, which is becoming increasingly unable to sustain growth,” says Camille Bullenau of the Rhodium Group.

To break this cycle, Beijing would have to stimulate domestic consumption and reduce its dependence on investment and exports. However, this would mean revising Xi’s economic course, which prioritizes technology and military power.

“We can see how the system has reached its limits,” notes Jacob Günter , an expert at the MERICS Institute for Chinese Studies .