Chinese President Xi Cautions Heightened Vigilance in Party Speech

Chinese President Xi Jinping spoke at a Chinese Communist Party special gathering – a study session for guarding against major risks – on Monday. In his speech, attended by senior provincial officials and central government ministers, Xi called on Party elites to stay alert for any "black swans," or unforeseen events, and to take steps to prevent "grey rhinos," predictable but ignored threats.

Xi's ominous words were delivered at a time when both foreseen and unforeseen events have come to the fore. Domestically, GDP growth in 2018 has dropped to a 28-year low of 6.6 per cent, and imports to China have fallen 10 per cent from November to December 2018, reflecting weaker local demand. Concomitantly, China's surplus account of foreign reserves has been shrinking, and the debt of state-owned enterprises (SOEs) and local governments has continued to rise. Externally, the ongoing trade war with the United States and a potential rise in import duties to the U.S. from 10 per cent to 25 per cent in March could further harm China's slowing economy. What's more, the Huawei affair have escalated the tensions between China, the U.S., and Canada, creating uncertainty among Chinese officials regarding the future of economic co-operation with OECD countries. Xi and his colleagues are concerned that a combination of these foreseen events and future, unforeseen incidents could hamper China's development and foment political stability.

China has taken a host of measures to arrest the trend of a slowing economy. Income tax for individuals were reduced in order to stimulate consumption. China's Central Bank has also made funds available for loans to private companies at a low interest rate in order to encourage private-sector development. It is possible that current economic challenges will compel China to pursue reforms, such as restructure of its inefficient SOEs and private sector revitalization, which will yield benefits in the long term. China watchers, meanwhile, fear that given increasing adversity at home and abroad, China is more likely to step up censorship and put further constraints on citizens' free speech.