News Analysis

China’s Fourth Plenum recently wrapped up with a familiar pledge: The next five-year plan will deliver “high-quality development” and “technological self-reliance” under even tighter Chinese Communist Party (CCP) control. Officials were told to brave “high winds, choppy waves, and even dangerous storms.”

While the Party’s tone was confident, experts who spoke with The Epoch Times gave a very different picture.

“So far, money is voting with its feet,” said Frank Tian Xie, a business professor at the University of South Carolina–Aiken.

China’s economic system, the experts said, still runs on the same principle: The CCP overrides prices, law, and accountability.

This creates a cyclical pattern—from Mao Zedong’s central planning to Deng Xiaoping’s “birdcage” reforms and now Xi Jinping’s recentralization—that consistently results in deadlock, the experts noted.

Each time Beijing tightens its control, private enterprise stagnates. When it eases restrictions, politically connected insiders profit, and the controls tighten again.

The Fourth Plenum didn’t break that pattern; instead, it reinforced it, they said.

What Beijing Promised and What Investors See

The Fourth Plenum communiqué packed the 15th Five-Year Plan with the usual slogans—“high-quality development,” “self-reliance and strength in science and technology,” “opening up,” “reform comprehensively”—all under “unified” Party leadership.

To investors, that translates into heavier state direction combined with appeals for private and foreign capital to keep growth alive, Xie told The Epoch Times.

China’s balance-of-payments data—the record of its transactions with the rest of the world—show that net foreign direct investment (FDI) has fallen to its lowest level since the early 1990s.

Net FDI inflows plunged to $51.3 billion in 2023 from a peak of $344 billion in 2021—an 85 percent drop—then fell further to about $18.6 billion in 2024, the lowest in three decades, according to official data.

The squeeze deepened when China’s real estate boom collapsed in late 2021. As land sales and home purchases dried up, local governments lost their main source of income. For years, the Chinese regime had financed subways, airports, and industrial parks through local government financing vehicles, or LGFVs—entities that acted as intermediaries to raise funds for development projects.

Now, LGFVs are struggling to refinance an estimated 78 trillion yuan ($10 trillion) in liabilities—more than half the size of China’s economy—according to research by global financial services group BBVA.

In 2024, real estate investment fell by 10.6 percent, new construction starts dropped by 23 percent, and land-sale revenue—critical for local governments—fell for the third straight year, down by 16 percent from 2023, according to China’s National Bureau of Statistics.

The weak property market has added pressure to an already bleak job outlook for young people.

In August, official data put youth unemployment (aged 16 to 24) at about 19 percent—the highest since the regime introduced a revised methodology in December 2023 that lowered the rate by excluding students.

By comparison, the Organization for Economic Cooperation and Development (OECD) youth unemployment average stood at 11.2 percent in July, with the United States at 10.8 percent and Japan at 4.1 percent.

“None of those numbers suggests a turnaround is near,” Xie said, referring to data regarding FDI investment, property market revenue, and youth unemployment.

Different Eras, 1 Operating System

Modern Chinese economic policy falls into three main periods, all driven by the same core idea—that the CCP maintains absolute control—according to U.S.-based China affairs analyst Wang He.

Under CCP leader Mao Zedong, total control produced chronic scarcity. An example is the Great Leap Forward (1958–1962), during which market mechanisms were replaced by quotas, farms were collectivized, and political campaigns set production targets.

The central planning led to officials inflating grain production figures to meet targets, causing widespread food shortages and a nationwide famine that historians estimate killed tens of millions of people.

“Under Mao, the Chinese economy was on the verge of collapse,” Wang told The Epoch Times.

Xie said, “A planned economy can’t keep up with the needs of a modern market.”

Deng Xiaoping rose to power two years after Mao’s death in 1976.

Although he’s known for leading China’s “Reform and Opening Up” period, Deng did not scrap Party control; instead, he reorganized it. His dual-track reforms maintained state targets while allowing excess output to be sold at market prices.

Special Economic Zones followed, and later, China’s entry into the World Trade Organization drew foreign capital and turbocharged exports.

Vice Premier Chen Yun, now deceased, likened Deng’s strategy to letting a bird fly inside a cage. According to this theory, the market is the bird, and the state planning is the cage—meaning, markets could move, but only within limits set by the Party.

Subsequent CCP leaders, including Hu Jintao and the late Jiang Zemin, largely maintained this model.

The result was rapid growth accompanied by crony capitalism, as land, credit, and licenses remained under the Party’s control.

“In Deng’s ‘birdcage economy,’ even the largest private enterprises grew out of crony capitalism,” Wang noted.

Such growth came with its costs, as it fostered an environment in which profit took precedence over ethics and morals.

For example, the 2008 melamine milk crisis, which sickened hundreds of thousands of children, showed how weak oversight and corner-cutting could be deadly, according to Wang.

Xi’s Era: Consolidation of Power

Xi took power in 2012, promising to eradicate corruption and bring greater economic vitality—an economy that could move faster, innovate more, and channel resources more efficiently.

At the 2013 Third Plenum, he pledged to let “the market play a decisive role” in resource allocation.

But in practice, his anti-corruption drive consolidated power. CCP committees gained greater say within companies, regulators took a more hands-on role, and policy goals began steering the market.

In 2015, Xi launched Made in China 2025 to push manufacturing up the value chain—particularly in semiconductors, robotics, and aerospace—aiming to cut reliance on foreign technology and build national champions through state subsidies, forced technology transfer, and intellectual property theft.

In 2017, Beijing enacted its first comprehensive Cybersecurity Law, giving the state broader control over data and the digital economy. The law classifies business and commercial data as part of national security, requires key information to be stored in China, mandates security reviews for critical infrastructure, and introduces real-name registration for internet access, domain registration, and online communications.

In 2020, regulators drew the “three red lines” to limit the ratio of debt to cash, equity, and assets, a move that helped trigger the default and liquidation of Evergrande—once China’s largest property developer—and a wider property slump.

That same year, Beijing abruptly halted Ant Group’s record initial public offering, or IPO—then set to raise more than $34 billion—days before launch after founder Jack Ma criticized financial regulators.

“The episode signaled that private scale and data ultimately answer to politics,” Wang said.

Then came the major zero-COVID lockdowns, which hit household and small-business balance sheets and left China’s gross domestic product growth at 3 percent in 2022, one of the nation’s weakest performances in decades.

Amid record unemployment, weak domestic demand, and a property slump, Beijing doubled down with the Data Security Law and the Personal Information Protection Law in late 2021, imposing strict rules on how data can be stored in China and limiting the transfer of personal information overseas.

The revised Counter-Espionage Law in 2023 expanded the definition of espionage to include a broad range of activities, allowing authorities to raid due diligence and consulting firms and creating legal gray zones that can stall routine work for multinationals.

Abroad, Beijing has used export controls on key inputs such as rare-earth elements to serve geopolitical aims, showing that commercial flows can be opened or closed to fit state priorities, Wang noted.

“How would investors in any sector feel secure?” he said.

Wang noted that throughout Mao’s planned economy, Deng’s partial market opening and reform, and Xi’s increased controls, one constant endures: The market operates but always within the Party’s cage.

“Trying to change how the CCP operates is like cutting open a patient to remove two tumors and finding cancer everywhere,” Xie said. “Cutting them out would kill the patient, so better just let it run its course.”

China’s ‘Low Human Rights Advantage’ Has Reached Its Limit

According to prominent Chinese historian and economist Qin Hui, China’s decades of rapid growth were also built on what he calls a “low human rights advantage,” which refers to the CCP’s ability to pursue economic growth at the expense of fundamental human and labor rights, rather than on innovation or true market reform.

In his influential 2007 essay “The Low Human Rights Advantage of China’s Economic Development,” Qin—a former professor at Tsinghua University and currently a visiting professor at the Chinese University of Hong Kong—states that communist China’s ascent to become the second-largest economy stemmed not from the free market but from the deliberate suppression of basic rights and fair competition.

For years, he noted, the system kept “labor, land, capital, and nonrenewable resources” artificially cheap while blocking genuine bargaining and curbing transaction rights. The state “lowered costs” by limiting freedom rather than improving efficiency.

According to Qin, this model turned China into an “investor’s paradise,” enabling collusion between officials and businesspeople to seize land, exploit labor, and plunder resources. It attracted global capital, fueled exports, and produced large trade surpluses, but the gains largely went to those in power rather than ordinary citizens.

The result is what he calls a “distorted economy”—one that depends on the absence of rights to remain competitive.

“Authoritarianism can indeed stimulate growth,” Qin wrote, “but its efficiency is deformed.”

He pointed out that China’s supposed “advantage” came from exploiting its own people, not empowering them, and like any system built on repression, it cannot last. When wages rise, resources deplete, and the world turns away, the “low human rights advantage” will be exhausted and the growth engine will sputter, he said.

Wang said he believes that the moment Qin had predicted has arrived.

“The same suppression that once drew foreign capital now drives it away,” he said.

Ning Haizhong and Yi Ru contributed to this report.