The Communist Party of China and the rest of the world have come to depend on high levels of Chinese growth. China’s current economic malaise has troubling ramifications.

China’s economy reportedly grew by 6.9 percent in 2015, compared with 7.3 percent a year earlier, marking its slowest growth in a quarter of a century. However, many analysts doubt the accuracy of these figures. Some believe that the economic data has merely been touched up, while others assert that the numbers are wholesale creations of the government. Several analyses suggest a 4-5 percent growth rate for 2015. Lower growth is not the only symptom of China’s deceleration. The past year has seen currency devaluation, stock market turmoil, a shaky property market, a slight decline in manufacturing and an 8 percent decrease in trade. Most governments would react to economic uneasiness with policy adjustments, but Beijing feels a particularly powerful obligation to bolster the economy.

The Communist Party of China needs high economic growth to uphold its legitimacy. Communist ideology — the CPC’s original raison d’être — has long since ceased to matter in practice. In its stead an implicit social contract has developed in which the Party provides prosperity in exchange for a monopoly on political power. As long as most Chinese feel that their lot is steadily improving, so the theory goes, they will be content without democracy. Corruption, pollution and income inequality will also produce less societal discontent if they are merely seen as unfortunate side effects of China’s surging prosperity.

However, if members of the general population feel that their lives are not improving, they may come to see the entire system as flawed. Economic slowdown, dishonest officials, poisonous air and inequity would come to be seen as symptomatic of an ineffective government rather than byproducts of the country’s transformation. This is more of a risk in the poorer interior provinces which have been left behind as the eastern seaboard became richer. If the government’s implicit promise to them is not fulfilled through growth, discontent will likely grow. 2015 saw double the number of labour strikes and protests in China compared to the previous year. The prospect of serious economic dislocation is frightening for the Communist Party: economic turmoil was one of the factors which caused the 1989 Tiananmen Square protests.

Continued high growth may also be needed to keep the economy stable: private and state debt has soared from 160 percent of GDP during the financial crisis to over 240 percent today. Economic slowdown translates into less income for firms and local governments, which could reduce their ability to repay and service their debts.

Though China is certainly not in an economic crisis, President Xi Jinping has taken a series of measures to boost the economy and bolster support for the government. Some of these actions have troubling implications for both China and the wider world.

The government’s direct responses to the past year’s economic and market unease have involved reduced interest rates, a lowered reserve requirement for banks, devaluation of the renminbi and heavy-handed stock market intervention. While the first two measures are sensible, the government’s intervention in the currency and stock market has hurt its credibility as a capable economic manager. The devaluation of the RMB led to fears of further drops, forcing the People’s Bank of China to tap into its foreign exchange reserves to buy yuan and prop up the currency. This has led to a $500 million fall in China’s forex holdings (though its reserves remain the world’s largest). The initial devaluation has also hurt the renminbi’s reputation as an emerging international reserve currency. The government’s overreaction to the crisis in the stock market (which in China is only a small part of the overall economy) belies its declared intention to let the market play a “decisive role” in the economy.

Xi Jinping also has increased suppression of dissent and has initiated a highly popular anti-corruption drive. This will fortify the CPC’s position should the slowdown deepen. Xi could also resort to stoking ultranationalism. This is a strategy that has proven effective for a different illiberal, economically challenged regime: that of Vladimir Putin. His example shows that the perception of a grave foreign threat can provide unity of cause for undemocratic regimes and their subjects even in the midst of a recession. The most effective way for Xi to stoke nationalist sentiment would likely be to provoke Japan — a traditional target of nationalist rage — over the disputed Senkaku/Diaoyu islands in the East China Sea. An economically weaker China could well become more belligerent.

China’s economic malaise is not only a potential risk for its nearest neighbours. Since 2008 China has contributed to global growth more than the Eurozone, Japan, and the US combined, so its slowdown is a drag on the global economy. China is also a massive importer of commodities – it consumes half of the world’s coal and metal – and  slowing demand there has been a major factor in the steep decline in commodities prices since 2011. This decreased demand has resulted from the country’s transition from an export-led manufacturing economy to one based on domestic consumption. Due to this and global oversupply, the World Bank predicts that commodities prices will remain depressed for at least the next five years. This portends a harsh readjustment for countries that depend on commodity exports. Countries like the Democratic Republic of the Congo, Mauritania and Zambia rely heavily on metals exports and are poorly equipped to absorb the coming loss of revenue (though more so than in the past). Developed commodities exporters like Australia, Canada and Chile will be able to cope with this rough patch far more effectively due to their more diversified economies and healthy governmental institutions.

China’s comedown from its boom years has long been awaited with trepidation: the Communist Party fears social unrest, China’s neighbours fear resurgent nationalism and the world dreads the economic consequences. The past year has been bumpy but not bruising; China is not yet in what could be called a “hard landing”. The world will be closely watching how Chinese policymakers handle the economy in 2016.

Roman J Madaus is a Master’s student at the Strategic and Defence Studies Centre, Coral Bell School of Asia Pacific Affairs, Australian National University and a current intern at the Australian Institute of International Affairs’ National Office. This article can be republished with attribution under a Creative Commons Licence.