Xi Jinping's economic policies have puzzled observers who expected China to continue prioritizing growth above all else. The common thread connecting tech crackdowns, common prosperity, and dual circulation is a strategic bet on state capacity over market dynamism.
The Core Wager
Xi's bet is that a more controlled economy, with reduced dependence on both foreign technology and domestic capital, will prove more resilient and sustainable than the previous model—even if it grows more slowly.
The Historical Precedent
This represents a partial return to earlier models of state-led development, updated for technological competition with the US. The assumption is that state direction can channel resources more effectively than markets in strategic sectors.
Risks and Unknowns
The bet carries substantial risks. State-directed investment has a mixed track record, and reducing entrepreneurial incentives may undermine the innovation China needs. Whether this gamble pays off will define China's trajectory for decades.