Xi Jinping’s “East rising, West declining” doctrine, the claim that Chinese power has overtaken the West and that the global balance has tipped in Beijing’s favor, is failing because it was never accurate. Even in April 2026, the United States, Europe, and Japan remain far ahead of China in economic output per capita, technological innovation, and institutional resilience. The doctrine has produced two policy disasters. Internationally, it triggered the aggressive “wolf warrior” diplomacy that turned the entire democratic world against Beijing. Domestically, it convinced Xi Jinping that the Communist Party could safely roll back the private sector under a policy known as “the state advances, the private sector retreats.” Together, these two bets are pushing the Chinese Communist Party into the worst structural crisis it has faced since taking power in 1949.
CCP general secretary and China’s top leader Xi Jinping is now caught between worsening problems at home and a hostile international environment, and recent Chinese policy choices show no sense of direction. They offer no solutions to the regime’s domestic or foreign troubles. What remains is a pessimistic assessment of the future and a single instinctive response to the prospect of collapse: stability maintenance, the regime’s term for repression aimed at keeping the population under control.
How the Chinese Communist Party has historically treated economic reform
The Communist Party has always treated market reforms as a temporary tool, not a permanent system. Even during the worst stretches of CCP rule, including the famines and economic collapse of the Great Leap Forward, the Party has refused to admit that its economic failures stem from the system itself. It has blamed those disasters narrowly on Mao Zedong’s Great Leap Forward and on the excesses of various political campaigns, treating them as deviations rather than consequences of one-party rule.
After the Great Leap famine in the early 1960s, then-state president Liu Shaoqi introduced the “three freedoms and one contract” reforms in the countryside, a limited concession that allowed peasants to farm small private plots, run rural side businesses, and contract output quotas with their production teams. Within two or three years, rural conditions stabilized. The Party drew a specific lesson: short-term concessions on economic policy work as a tool to defuse crises and adjust the economic environment. The lesson it refused to draw was that those concessions worked because they relaxed Party control. This pattern has shaped every subsequent reform episode in China, including the one that defines the country today.
Why Deng Xiaoping launched reform and opening as a temporary fix, not a permanent shift
Deng Xiaoping, the CCP leader who launched the reform and opening era in 1978 and is widely credited in the West with transforming the Chinese economy, treated reform from the beginning as a temporary instrument. Its purpose was to break out of an economic dead end, ease social tensions, and restart growth. Once living standards and the economy returned to something close to normal, the borrowed instruments of market economics had served their purpose. The plan was always to return to collective ownership and central planning, in order to safeguard the leadership of the Communist Party and what the Party calls the dictatorship of the proletariat.
For the best of our weekly content！
You are now signed up for our newsletter
Check your email to complete sign up
This is the meaning of the “Four Cardinal Principles” that Deng laid down at the start of reform and opening in 1979. The principles state that no matter how far reform progresses, the Party will not abandon one-party rule or the socialist road. They were the political red lines drawn from day one. Through every subsequent administration, from reform-era Party leaders Hu Yaobang and Zhao Ziyang in the 1980s, to the Jiang Zemin and Zhu Rongji leadership of the 1990s, to the Hu Jintao and Wen Jiabao team of the 2000s, and now to Xi Jinping, the underlying intent has not changed. Only the speed and intensity have varied.
How the 2008 Beijing Olympics convinced the Chinese Communist Party it could roll back the private sector
By the late Hu Jintao and Wen Jiabao years, the Chinese economy had grown to a scale that astonished the world. The 2008 Beijing Olympics served as a public showcase of China’s emergence as a major economic power. From that moment onward, the world began to take Chinese achievements seriously, and the Party’s confidence surged. The leadership concluded that it now had the strength to reverse course, and the policy known as “the state advances, the private sector retreats” moved onto the official agenda.
In simple terms, “the state advances, the private sector retreats” means systematically expanding the role of state-owned enterprises while squeezing private firms out of major industries. It is the central economic policy of the Xi Jinping era, and it rests on three strategic miscalculations.
First miscalculation: confusing China’s economic size with genuine economic strength
The first miscalculation behind “East rising, West declining” is the Party’s belief that Chinese economic achievements are sufficient to stand on their own among the world’s great powers. China’s economic growth has been a story of quantitative expansion, not qualitative transformation. The economy is enormous, the growth figures are striking, foreign exchange earnings have reached astronomical levels, and Chinese national power has overtaken Britain and is closing on the United States. But Chinese innovation in science and technology has been limited.
During the same period, the United States invented the personal computer, the internet, the smartphone, and artificial intelligence. These four era-defining products fundamentally transformed how humans live, and they generated era-defining economic growth in the process. China has produced no comparable foundational innovation. The United States is structurally strong; China is bloated.
Second miscalculation: claiming that one-party rule is what produced Chinese growth
The second miscalculation behind Xi Jinping’s economic doctrine is the Party’s belief that improvements in the Chinese economic environment came from the structural advantages of one-party authoritarian rule. The Party argues that authoritarian government enables faster decision-making, nationwide policy implementation, central allocation of resources, and government control over distribution.
The Party has forgotten an obvious counter-question. If one-party rule confers such advantages, why did the Communist Party preside over more than half a century of stagnation and crisis after taking power in 1949? Why was it only after market mechanisms were introduced that the economy showed astonishing vitality?
The answer is straightforward. After reform and opening, the Party recognized private property rights. This single change transformed the structure of the Chinese economy. The competitive logic of the market created vast space for private firms to grow, in ways that would have been unimaginable under collective ownership and central planning. The Communist Party has reversed cause and effect, taking credit for results produced by the very market mechanisms it always intended to eventually withdraw.
Third miscalculation: the belief that the United States now needs China more than China needs the United States
The third miscalculation behind “East rising, West declining” is the Party’s belief that, having reached the position of the world’s second-largest economy, China no longer needs the United States. The reverse, in this view, is true: the United States now needs China. Chinese economic power is treated as sufficient for self-sufficiency, no longer dependent on American support for further development. American manufacturing, the Party assumes, would face insurmountable problems if cut off from China.
Acting on this assumption, the CCP began to challenge the United States openly, cultivating small and middle-power countries as a base for controlling international institutions, launching a strategic expansion under the banner of leading the “Global South,” and lighting fires in the backyards of the United States, Europe, the United Kingdom, and Japan. The aggressive “wolf warrior” diplomacy with which Chinese diplomats began conducting themselves on the world stage destroyed the favorable external environment that reform and opening had produced. The Communist Party turned itself into an enemy of nearly every major power. Across the entire world, only three governments now describe their cooperation with Beijing as having “no upper limit”: Russia, North Korea, and the Chinese regime itself.
How wolf warrior diplomacy destroyed the global environment that fueled Chinese growth
Hostility toward the United States and territorial expansion are two faces of the same wolf warrior posture. The Communist Party has used the Belt and Road Initiative, its flagship overseas infrastructure and lending program, to scatter money around the world, while using anti-American rhetoric to draw small and middle-power countries closer. Both moves provoked extreme resentment across the American political establishment. The United States woke up to Chinese expansionist ambitions, and together with European and Japanese democracies, it now treats the Communist Party as the principal ideological adversary of the West.
This Western turn has made the large Western markets that the Chinese economy depended on increasingly difficult to access. Western governments are guarded against Chinese state penetration, and they are deliberately blocking Chinese access to advanced Western technology. The Party’s use of rare earths and other raw materials as leverage against Western governments has reinforced the perception that Beijing is an unreliable partner. The factors that powered Chinese economic growth, that is, open Western markets, Western technology transfer, and trusted commercial relationships, have evaporated within the span of a few short years.
Why America, Europe, and Japan still lead the world in 2026
There is no such thing as “East rising, West declining.” Even in 2026, the United States, Europe, and Japan remain far ahead of the rest of the world in economics and technology, to say nothing of the institutional advantages that more than a century of democratic governance has given them. Xi Jinping’s wishful conclusion that the East is rising and the West is falling proves that he lacks basic self-knowledge and any sober grasp of the international strategic situation.
No matter how much money a state holds, it eventually runs out. With outflows and no inflows, no economy can sustain itself. The objective world contains no “East rising, West declining,” and no institutional superiority of “the state advances, the private sector retreats.” These twin miscalculations have generated the basic state policies that are gutting the Chinese economy from within.
Why repression is the Chinese Communist Party’s only remaining policy tool
“East rising, West declining” abroad and “the state advances, the private sector retreats” at home are both dead ends, and the Communist Party has nowhere left to go. Xi Jinping’s appetite for grand projects and historical legacy has not been matched by the cognitive capacity to read the world or the times. Having misjudged the world repeatedly, he has built each successive decision on those misjudgments, pushed them harder when they faltered, and refused to correct course when they failed. This is a self-destructive trajectory that no one is in a position to reverse.
With stability maintenance now elevated to the regime’s first priority, what lies ahead is irreversible: a steady tightening of political and cultural life inside the People’s Republic, a continued strangling of personal freedoms, and a worsening of daily social conditions. Whether violent repression can keep the Communist Party in power a while longer depends entirely on how much the Chinese people are willing to endure.
This article was authorized for republication by the author from his Yan Chunkou Facebook page.