Year in review 2015: China’s boom fizzled, but its one-child policy doubled

The leaders of the world's most populous country are feeling a different kind of heat as their red-hot economy shows real signs of trouble, writes Paul Mooney

A family takes a selfie in front of a giant basket of flowers on display at Tiananmen Square for the 65th National Day celebrations in Beijing, China on September 29, 2014. The country ended its one-cShow more

China’s economic growth continued to slow as 2015 drew to a close, hobbled by the Communist Party’s failure to carry out much-needed economic and political reforms, and despite numerous interest-rate cuts and other stimulus measures introduced by the government.

The situation is dire. Key parts of the economy, such as construction, continue to decline as the once-booming housing industry slowed. Consumer spending, which it was hoped would bolster the economy, has not been as significant as expected, and won’t be any time soon. The social safety net, therefore, will have to be widened so that people will feel less of a need to save for personal disasters.

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Housing, which amounts to about 25 per cent of China’s GDP, is seeing supply outstrip demand, and as a result, housing prices have fallen about 6 per cent from a recent peak, and could eventually fall by as much as 10 per cent.

According to official numbers, the economy is continuing to grow by 7 per cent. However, many economists question official statistics, saying GDP is lower than reported, and likely has been for years.

The International Monetary Fund has reduced its GDP growth forecast for China to 6.8 per cent in 2015 from 7.4 per cent in 2014, and Oxford Economics has predicted growth in 2015 may only reach 6 per cent, which would be the lowest in 25 years. Some experts predict growth won’t exceed 4 per cent, far short of what the government says is needed to create enough jobs.

The reputation of China’s president, Xi Jinping, took a hard hit in the summer as the stock market dived after the government had for months been promoting investment. Nervous Chinese officials aggressively intervened to prop up shares after their value plummeted by US$2 trillion (Dh7.34tn) in less than a month. The government took measures to block large shareholders from selling, state-run institutions were ordered to buy and a number of companies with falling share prices were allowed to stop trading.

The market rebounded, but then suffered its worst sell-off in three months on November 27, as investors once again retreated, frightened by a government clamp down on stock market speculation, reports of regulatory investigations of securities companies, anticipation of a yuan devaluation and signs of a continuing economic slowdown. Moves to create a new Silk Road, dubbed “One Belt, One Road”, continue, but it remains to be seen how effective this will be in boosting the economy.

The Communist Party is also facing rising public anger. Citizens are worried about the state of the economy, heavy pollution, massive corruption, labour unrest, land grabs, ethnic tensions, and increasingly harsh restrictions on traditional and new media.

Worried about this growing challenge, the government launched an unprecedented crackdown in July that resulted in the arrest or interrogation of about 230 rights lawyers, legal assistants and activists. More than two dozen remain in custody and some have been given harsh sentences.

Meanwhile, Xi and Taiwan’s president, Ma Ying-jeou, made history in November when the two held a historic meeting in Singapore. While this first meeting between the leaders was heralded by some, analysts were quick to point out that this was purely symbolic.

Ma has low popularity ratings and will step down in May 2016. It seems almost certain that the Nationalist Party, or the Kuomintang, will suffer a large defeat in the presidential and legislative elections set for next January. There was also widespread public opposition in Taiwan to Ma’s agreeing to meet with Xi. Nothing resulted from the meeting.

Elsewhere, concerned that its ageing population could pose a threat to China's economic development, the Communist Party leadership in October ended its long-term "one child" policy, declaring that all married couples would now be permitted to have two children. China is also set to give official status to about 13 millon children born illegally under the system. If this is implemented, they for the first time will receive access to education and health services. While the announcement was met with widespread surprise, many experts said it was unlikely that the new policy would result in either a baby boom or an economic revival. For one, many citizens interviewed immediately following the announcement expressed doubts about having a second child due to economic considerations.

The government has maintained its legitimacy for the past four decades by delivering the economic goods. But if it can’t continue to do that, the party can expect to face increasing public dissatisfaction.

Discontent has been growing for years, and is a cause of deep concern for the Communist leadership. Incidents of social unrest are now estimated to be about 180,000 a year.

With Xi Jinping seemingly unable to adopt the far-reaching reforms needed to get the economy and country back on track, the short-term outlook is not positive.

Paul Mooney is a freelance journalist who has reported on China, Taiwan and Hong Kong.