More headaches for Xi

Young Chinese are facing the first prolonged economic slowdown of their lifetimes [View in browser]( [Bloomberg]( Welcome to Balance of Power, bringing you the latest in global politics. If you haven’t yet, sign up [here](. A $7 trillion stock rout. The worst deflation in decades. Mounting geopolitical threats. The [headaches aren’t going away]( for Chinese President Xi Jinping. The nation’s most powerful leader since Mao Zedong is overseeing an economy that in recent years has lurched from one crisis to another, unable to shake fears of a slowdown in growth. Battered equity markets have become the most acute symbol of crushed confidence within the world’s second-largest economy. In recent weeks, the market capitalization of China’s stocks has plunged to near four-year lows amid slumping valuations. Xi seems to be [getting personally]( involved in the rescue efforts, with Bloomberg News reporting that regulators plan to brief the president. It’s not yet clear whether any new support will come out of that meeting. Beijing surely wants to project a sense of control of the situation as it tries to convince investors to [regain their confidence](. That’s a hard feat to pull off, especially given none of the piecemeal measures to boost sentiment so far — trade restrictions, curbs on short selling — have moved the needle. That also goes for all of the steps policymakers have taken to boost the broader economy, whether in the form of policy rate cuts, other monetary easing or fiscal stimulus. It’s a sign of how deep China’s economic woes run, particularly in the beleaguered property sector. That’s not great news for Xi, whose consolidation of power has left him with all of the vulnerabilities attached to one-man rule. He’s the one in charge at a time when many Chinese, particularly younger generations, are experiencing the first prolonged economic slowdown of their lifetimes. — [Jill Disis]( Customers at a food stall in Shenzhen on Jan. 18. Photographer: Qilai Shen/Bloomberg Global Must Reads The Baltic states are growing more wary of an emboldened Russia with imperialistic ambitions following the invasion of Ukraine. While membership of the European Union and NATO helped blunt intimidation by Moscow, the war [changed the equation]( for Latvia, Lithuania and Estonia and created the sense that a new threat is emerging from Moscow. Signs protesting Russia’s invasion of Ukraine outside the Russian Embassy in Tallinn, Estonia. Photographer: Peter Kollanyi/Bloomberg A bipartisan deal to unlock Ukraine war aid and impose new US border restrictions is on the [brink of collapse]( in the Senate, where Republican support crumbled in the face of opposition from GOP presidential frontrunner Donald Trump. The $118.3 billion deal was the result of months of closed-door Senate negotiations but its prospects began faltering soon after negotiators announced the details late Sunday. Israel says time is running short to find a diplomatic solution to the presence of Hezbollah fighters along the country’s northern border with Lebanon. Skirmishes with the Iran-backed Shiite militant group since the Israel-Hamas war erupted on Oct. 7 [have killed scores of people](, and Israel is warning that it is prepared to open another front with a military attack on southern Lebanon if Hezbollah doesn’t move back. Former Pakistan Prime Minister Imran Khan’s PTI party is absent as roughly 129 million voters go to the polls on Thursday with the [political landscape drastically changed]( from the last election in 2018. As Betsy Joles writes, his supporters remain defiant as the one-time cricket star sits in jail and another former premier, Nawaz Sharif, is the favorite to take power. Prabowo Subianto is reaping rewards of an extensive image makeover, and his odds have never looked better to become Indonesia’s president in Feb. 14 elections. The former general, who was dismissed for alleged human rights abuses and banned from the US for two decades, is known for fiery nationalist speeches. Over the past few months, helped by a social media campaign that features his cats and dance videos, the 72-year-old has tried to come off as a [cuddly grandpa](. Yemen’s Houthi rebels said they targeted two vessels in the southern Red Sea today as the group [steps up attacks]( on merchant shipping since US and UK airstrikes began last month. Nikki Haley has requested Secret Service protection, citing [threats she has received]( as the last major Republican challenger to Trump for the party’s presidential nomination, according to her campaign. Lawmakers in Senegal agreed to delay presidential elections in one of Africa’s strongest democracies, [raising tensions that risk destabilizing]( the emerging natural gas producer in a region prone to military coups. Washington Dispatch Talks continue in Beijing today between US Treasury and Chinese government officials on economic matters. The agenda, Treasury officials say, includes challenges [facing the global economy](, monetary policies and possible ways the two superpowers can cooperate on issues such as climate change and developing country debt. Such encounters were once fairly routine but have taken on more significance after US relations with China began deteriorating during the Trump administration. They improved in the second half of 2023, with Presidents Joe Biden and Xi meeting in November to stabilize ties. Yet the question of Taiwan’s future, Chinese and US actions in the South China Sea, and issues including trade and export controls remain major areas of contention. The talks in Beijing are part of a broader effort by the Biden administration to maintain channels of communication with its key geopolitical rival, especially on shared challenges, while also pursuing policies to protect its national security. Treasury Secretary Janet Yellen said she plans to visit Beijing this year as part of continued engagement with her counterpart, Chinese Vice Premier He Lifeng. One thing to watch today: Yellen will testify before the House Financial Services Committee on the annual report of the Financial Stability Oversight Council. [Sign up for the Washington Edition newsletter]( for more from the US capital and watch Balance of Power at 5pm ET weekdays on Bloomberg Television. Chart of the Day Pakistan’s voters are the most [pessimistic about their economy]( in years ahead of the election, according to a Gallup poll, as the fastest inflation in Asia makes it increasingly difficult for them to make ends meet. And Finally A secretly recorded video purporting to show South Korean First Lady Kim Keon Hee being gifted a luxury Dior handbag has eroded public support for President Yoon Suk Yeol months before a crucial election. As [this QuickTake]( explains, it’s the latest in a string of controversies surrounding the first lady who, in a break with tradition, has featured prominently in presidential affairs and Yoon’s election campaign. The president is expected to address the matter in a national TV interview that airs tomorrow. Yoon Suk Yeol, left, and Kim Keon Hee. 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