PDB Afternoon Bulletin | October 13th, 2026: Xi Jinping's Plan to Make China a Superpower Is Backfiring & Russia's European Sabotage

Mike Baker (0:11)

It's Tuesday, the 13th of October, welcome to the PDB Afternoon Bulletin. I'm Mike Baker, your eyes and ears on the world stage. All right, let's get briefed. First up, Xi Jinping's superpower ambitions are creating serious problems for China's economy, threatening to undermine the very global dominance that he's spent years trying to achieve. Later in the show, Britain's top spy warns that Iran and Russia are escalating covert attacks across Europe, targeting military installations and critical infrastructure. But first, today's afternoon spotlight. For more than a decade, China's president, Xi Jinping, has been pouring enormous resources into an effort to turn China into the world's dominant superpower. Massive factories, advanced technology, artificial intelligence, and a military capable of challenging the US. Now, in some respects, the strategy is working. China has become an industrial powerhouse, capable of producing everything from electric vehicles and batteries to sophisticated weapons systems. But there is a problem. Xi has been borrowing enormous amounts of money to finance those ambitions, and increasingly, the Chinese economy is struggling to keep up. A new investigation by the Wall Street Journal reveals just how expensive Xi's ambitions have become, and why the strategy that he believes will make China the world's dominant power may be creating serious problems for the country's economic future. Since Xi took power in 2012, the amount of outstanding credit across China's economy has increased by more than $43 trillion.

To put that in perspective, the total annual economic output of the US is approximately $32 trillion.

Give or take a couple of bucks. And all that borrowing has helped finance an extraordinary expansion of China's industrial capabilities. Beijing has directed money toward enormous factories, high-speed rail networks, advanced semiconductor facilities, electric vehicle manufacturing, and countless other projects intended to make China the undisputed leader in strategic industries. Xi's thinking is that economic power and national security go hand in hand. If China dominates the technologies and industries of the future, it becomes less dependent on the West and better positioned to challenge American influence. But here's where the trouble begins. Building a factory doesn't necessarily mean there's enough demand for what that factory produces. And China's government has encouraged companies and local officials to build enormous amounts of manufacturing capacity, often with borrowed money, whether the market can support it or not. The automobile industry provides a particularly revealing example. According to new figures reported by the Associated Press, Chinese passenger car exports surged 64 percent in September, compared with a year earlier. But sales inside China fell by 27 percent. Chinese factories are shipping enormous numbers of vehicles overseas, while the domestic market for those same vehicles is shrinking. And that creates a problem, of course. Manufacturers compete aggressively for customers, cutting prices and squeezing profits. And the more China depends on exports to absorb all that production, the more vulnerable it becomes to foreign tariffs and trade restrictions. We're already seeing that play out, as governments in Europe and elsewhere move to protect their own industries from a flood of Chinese products.

And the problems aren't confined to manufacturing. For years, China's economy relied heavily on a booming real estate industry. Developers built enormous apartment complexes, households invested their savings in property, and local governments collected substantial revenue from selling land. But that boom has now gone bust. Property investment has plunged, housing prices continue falling, and millions of apartments remain unsold. That has left Chinese families feeling poorer and less inclined to spend, while local governments have lost a major source of revenue. And those local governments have another problem. Many borrowed enormous sums to finance infrastructure and industrial projects that Beijing encouraged them to pursue. Now, they're struggling to pay those bills. In fact, just last week, China's finance ministry announced another $82 billion in borrowing capacity to support local governments and infrastructure. More than half that money is intended to help local authorities simply maintain ordinary government operations. In other words, Beijing isn't simply borrowing money to build the next generation of factories and infrastructure, it's also borrowing to help parts of the government continue functioning. Meanwhile, the cost of servicing all that debt, well, as you might guess, is rising. According to the Financial Times, nearly one-fifth of China's central government general public budget is expected to go toward debt payments this year, up considerably from just over a decade ago. That's money that can't be spent elsewhere without additional borrowing or higher taxes or cuts to other programs. And that brings us to Xi Jinping's larger dilemma. China has made genuine advances in several industries critical to its strategic competition with the US., its electric vehicle companies or formidable competitors, its battery manufacturers dominate important global markets, and Beijing continues investing heavily in semiconductors and artificial intelligence, robotics and military technology. Chinese factories continue expanding while Chinese consumers remain reluctant to spend. Local governments are struggling with debt while Beijing keeps directing money toward more industrial development, and foreign markets are becoming less welcoming to the enormous quantities of products China needs to sell.