The 21^st century was meant to be Asian. Actually, if you look and listen closely enough, it was expected to be Chinese. The 2008 financial crisis generated an opportunity for Chinese narrative-makers to spin a riposte declaring that in Asia, contrary to Western insistence, events never amounted to a crisis and only affected a declining West. The narrative industry run by Beijing duly coined the storyline of Asia’s rise and the West’s decline and multiplied it across media platforms, political formats, and academic networks. The century belonged to China, and only faked humility postponed this explicit insistence. Still, the last couple of years have shaken these certitudes, and the once seemingly invincible forward march of Beijing began to sputter quite spectacularly. Challenges to the country’s continued development appear to be multiplying across policy sectors and international terrains, throwing into doubt the celebratory pronouncements of its almost predetermined trajectory of advance.

Following the re-election of Xi Jinping as president for a third term, China’s polity transformation into an autocracy has been completed. Paradoxically, this brings both predictability and uncertainty. The former is due to clarity as to where eventual key decision-making lies in the system, and the latter is due to well-known risks of autocracies linked to extreme over-centralization and personalization. The abrupt end to Covid-19 restrictions at the end of 2022 is one early example of this kind of governance mode. Beijing has restarted its economy and diplomacy after a prolonged period of a restrictive ‘Zero Covid’ policy, hoping for a quick recovery across all sectors.

The country has also embarked on a new approach as a global mediator, already ticking off a success in bringing together Iran and Saudi Arabia and, much less convincingly, positioning itself as a force for good in the context of the war in Ukraine. Beijing has even made some compromises in the discussions on Sri Lanka’s debts in order to present a more responsible and engaged international posture. The country is opening up to tourism again and the overall message is one of a return to normalcy. Yet, Beijing is re-entering a different global context and is facing a rising number of obstacles which will make the successful navigation of this terrain much more difficult. China appears to be stalling.

There are a number of challenges for the country in various segments of the economy and society, potentially disrupting its attempts to position itself at the core of the 21st ‘Asian’ century. One is its stalled economic transition from an export-based to a consumption-based model. The authorities have repeatedly changed course in order to soften various disruptions in relation to this policy. For example, Beijing is relying on exports to kick-start its economy post-Zero Covid. Another challenge is the balance between party and ideological control and development and growth. Xi’s policy of tightening state control is impacting negatively various sectors, most importantly digital industries, as his crackdown on the likes of ‘Alibaba’, ‘Ant Financial’, ‘Didi’ has illustrated. The continued penetration of party functionaries into companies will further undermine their ability to grow and create a sustainable base for the future economy of the country.

Thirdly, China is now experiencing the effects of spiraling debt levels which are putting pressure on the fiscal sustainability of local governments, particularly due to the fact that they carried most of the cost of the last three years of on-off lockdowns. [U2] A deepening real estate crisis is causing havoc among households, funding models of state institutions, and financial structures. Demographic challenges are also ever more pressing as the ‘demographic dividend’ has come to an end, generating renewed longer-term doubts about Chinese growth. As Beijing adopts ever-lower growth targets, there is a palpable sense that the authorities are grappling to find the right policy combination to emerge from the prolonged period of economic uncertainty.

Given this context, the most important question of the next few years is related to the capacity and ability of the Chinese system, political leaders, and institutions to contain the spiraling accumulation of crises and begin to resolve some of them. This interpretation of Beijing’s current impasse is often ignored but is quite central to the fate of the country in the coming period. The present configuration of dilemmas and problems is unprecedented and appears to be beyond the governance approaches and modes adopted thus far by the Chinese Communist Party. Postponement, fiscal largesse, suppression, and downward shift of responsibility to subnational levels all seem exhausted options and unlikely to generate the desired outcomes. Indeed, the last few years have already highlighted the degree of governance complexity and the apparent inability of the system to manage it well.

For instance, the approach to tech companies has vacillated between a crackdown due to the control agenda and support due to the growth agenda, generating a great deal of unpredictability. Also, the abrupt end of the ‘Zero Covid’ policy came after a very sudden political decision of President Xi rather than through an elaborate, institutional process with related supporting measures. Such cases only serve to highlight the emerging monumental governance difficulty facing the establishment in Beijing. Their competence in this respect will have an enormous bearing on where the country will find itself in a few years’ time.

While China is stalling, her foreign policy and international posture are ever more solidified into a forward-leaning, quite aggressive mode often buttressed by nationalist feelings and discourse. In line with this established approach, the Chinese authorities are accelerating efforts to rewire as much as possible various components of the current global system. Politically, the Chinese side has been extremely busy formulating and setting in motion a series of international initiatives, even if they have failed to attract much attention and immediate enthusiasm.

The much-discussed ‘Belt and Road Initiative’ is now complemented by the Global Development Initiative. Recently, the Global Security Initiative was launched and is being followed by the creation of ‘groups of friends’ of these frameworks. In the energy domain, Beijing is attempting to rewire parts of the global energy system in its own direction. Deepening ties with Russia in the field of gas are revamping the energy supply networks in North Asia. The economic corridor with Pakistan is also partially aimed at energy source diversification. Beijing’s attempt to embed itself in the Middle East is driven by similar logic as well. Moreover, China is planning the establishment of an international organization for mediation which will extend its services to Indonesia, Pakistan, Laos, Cambodia, and others.

China is also pushing on with its efforts to further internationalize the use of the yuan. For instance, just last month, it became the most traded currency on the Moscow Exchange, overcoming the dollar. Importantly, the lack of full convertibility is being addressed by making it the preferred alternative vehicle for financial exchange among actors and countries fearful of being subjected to Western sanctions. While smaller in scale, a similar dynamic is emerging in the Middle East and Central Asia as China increases its economic imprint. In the longer term, Africa is likely to further strengthen a yuan-centered regional financial architecture. The aforementioned measures and policies are not exhaustive and serve to highlight the desire and rising political and institutional commitment of China to the construction of alternative orders.

This policy is underpinned by at least two notions. One is the explicit revisionism of President Xi and the Communist Party in contrast to the approach of the reform decades since the end of the 1970s. The second is that of ‘national rejuvenation,’ informed by nationalist sentiment and fueled by grievance and populist fervor. Importantly, the relationship between the containment of challenges and economic growth and a revisionist international posture is increasingly central, as Beijing will require success in the former in order to strengthen and create greater conviction and legitimacy for its expansionist foreign policy. Such a scenario is likely to generate a more stable and predictable way forward for the country. A failure to ensure continued economic advance will leave the CCP with only one option, that of aggressive nationalism. From this perspective, the stakes for the international order could not be higher.