Party priorities complicate plans to revive China's economy

Ideology is driving China's economic policy to a degree not seen since the country's opening to the West nearly half a century ago, deterring its leaders from taking steps to spur the sputtering economy.

- Lingling Wei

Economists and investors have been calling on Beijing to make bolder efforts to boost output-especially by promoting consumer spending, if necessary, by offering cash handouts, as the U.S. did during the pandemic.

Accelerating China's transition to a more consumer-led economy such as that of the U.S. would make growth more sustainable in the long term, economists say.

But top leader Xi Jinping has deep-rooted philosophical objections to Western-style consumption-driven growth, people familiar with decision-making in Beijing say. Xi sees such growth as wasteful and at odds with his goal of making China a world-leading industrial and technological powerhouse, they say.

Xibelieves Beijing should stick to fiscal discipline, especially given China's deep debt. That makes stimulus or welfare policies akin to those in the U.S. and Europe less likely, the people said.

Also unlikely are major market-oriented changes, or a dramatic reversal in the multiyear shift toward more centralized control of the economy. Although Beijing has eased off efforts to clamp down on consumer internet firms and other private companies-a campaign that led to weaker private investment-it remains skeptical of their unregulated expansion.

Meanwhile, China's economic outlook continues to darken.

Manufacturing activity has contracted, exports have declined, home prices are weakening and consumer prices have dipped into deflation. Youth unemployment has reached record highs.