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Why is Xi Jinping willing to slow down China’s economy?

China's GDP grew a lower-than-expected 4.9 percent year-on-year in the third quarter of 2021, a whopping three percentage points less than in the previous period. It's a big deal for the world's second-largest economy, the only major one that expanded throughout the pandemic — and now at risk of missing its growth target of 6 percent for the entire year.

Normally, such a drastic slowdown would have put the ruling Communist Party in a tizzy. But this time, Xi Jinping knows this is the price he must pay for his big plans to curb rising inequality and boost the middle class at the expense of the CCP's traditional economic mantra: high growth above all else.

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Can Xi save China from Evergrande?

Evergrande, China's second-largest property developer, got on Monday its best news in months: someone's willing to buy part of its hugely indebted real estate empire, probably for fen on the yuan. But the company's still in deep trouble: it owes a whopping $305 billion — about 2 percent of China's GDP.

Chinese authorities have spent weeks bracing for Evergrande's looming default like for a slow-moving train collision. With 1,300 projects across 280 cities across China, Evergrande — a gargantuan corporation that also runs theme parks, makes electric vehicles, and owns a soccer team — is a heavyweight in China's once-booming real estate industry, which has driven much of the country's economic growth over the past decade by relying on heavy borrowing.

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What We’re Watching: China’s Lehman moment, Malians heart Russia, Tunisian dictator vibes

Will Evergrande be China's Lehman Bros? Chinese authorities are bracing for the increasingly likely default of Evergrande, the country's most indebted property developer. If Evergrande — a gargantuan corporation with properties in 200 cities across China — stiffs its creditors, that'll send shockwaves throughout the country's financial system, and the wider Chinese economy and society. The possible ripple effects on home buyers and countless companies and individuals that do business with or are owed money by Evergrande have invited comparisons with Lehman Brothers, the US investment bank whose 2008 collapse triggered an American financial crisis that quickly spread to the entire world. Although in principle authoritarian China has ways of containing the fallout, the potential for social unrest is real — and opacity could make it worse. More broadly, the demise of such a big player in the country's once-booming real estate market, which accounts for over 7 percent of GDP, would expose the shaky foundations of China's debt-driven economic growth model, eroding confidence in China both at home and abroad.

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