For all of Chinese leader Xi Jinping’s surface-level confidence about China’s domestic strengths and growing international influence, his policy agenda—both at home and abroad—is sputtering.

Domestically, China’s economy is grappling with a profound economic deceleration exemplified by unprecedented levels of youth unemployment and a pronounced erosion of consumer and business confidence. Foreign firms no longer see China’s vast domestic market as an imperative destination for investment. Indeed, as the head of the EU Chamber of Commerce in China put bluntly, “Companies are beginning to conclude that, considering supply chain risks, considering anticipated lower profits in China, considering the continued barriers . . . that maybe other markets are becoming more competitive, more attractive.” The property sector, once a pillar of domestic growth, is in disarray, with major property developers now in various stages of default and bankruptcy. This situation has sparked broader apprehension about systemic vulnerabilities within the financial sector. Moreover, local governments are contending with escalating debt burdens and constrained fiscal capacity, severely hampering their ability to address routine governance challenges, including the payment of civil servant salaries.