When Xi Jinping and President Biden meet in San Francisco on Wednesday, they will both be hoping to show they are back to successfully managing their most important external relationship.

At a bad time for the Chinese economy, Xi aims to secure the continued flow of goodwill, technology, and capital from the United States.

Biden will hope that dialogue and even some agreements – there is speculation of one surrounding China’s willingness to clamp down on the production and export of fentanyl – will help his current poor opinion poll ratings a year before American voters have their say.

Xi doesn’t have that problem, but we can presume that his meeting with Biden, followed by a banquet with some of America’s most powerful corporate executives, is about an even stronger need to stabilise China’s US relationship.

At a bad time for the Chinese economy, he wants that stability to try to secure the continued flow of goodwill, technology, and capital from the United States.

China’s autocratic leader is in a curious position. At home he is hailed as a “core leader” and widely believed to face no effective opposition. Abroad and especially in relation to the Global South, he presents the “inevitable rise of China” calling card as the Communist Party attempts to restructure global governance relations and institutions in its interests, sidelining the United States and its allies in the process.

Yet he cares enough about the deterioration in China’s most important external relationship to want to stabilise it for now at least, even if no fundamental change or agreement can be realistically anticipated.

The key to this contrast is the economy. China’s power relations do not derive, after all, from its soft power, or its role as a champion of individual and human rights, and the rule of law. Rather they are based on China’s economic heft and status.

These remain considerable and impressive, but it is equally true that China’s economy is also displaying a faltering economic model, deep macroeconomic imbalances, a broken real estate market, and poor governance.

While it is tempting to attribute these shortcomings to zero-Covid policies, and even to Xi Jinping’s more repressive governance of China, it is not correct. China’s economic travails nowadays are due to many years of over-investment, especially in property and infrastructure, the accumulation of unaffordable debt burdens by local governments, state enterprises and more recently households, and the politicisation of business and finance according to the slogan that “the party leads everything”.

The drivers of economic dynamism, as we once knew them, have become the drivers of economic distress. And Xi carries the can, not for having caused them but for having failed to address, or having exacerbated them.

The key question is what is he likely to do about all this in order to arrest the malaise that seems to be spreading through society, including the fabled middle class, and through the business community. Reports abound that wealthier Chinese citizens are increasingly trying to get their money and/or themselves out of China, and that illicit capital outflows have become sufficiently large as to cause the financial authorities to stem the fall in the Yuan and the exit of capital.

Normally about this time of the year, every five years, one of the most important plenary sessions of the Communist Party takes place, the so-called 3rd Plenum. It often has a strong focus on economic strategy. In 2013, for example, major liberalising economic reforms were foreshadowed, but optimistic expectations were soon deflated as China’s economic development model faltered, and a much more state-centric, repressive and controlling governance regime emerged.

The politburo has so far failed to announce a new 3rd Plenum, and if it doesn’t happen next month, it will probably be called in 2024. This would be the moment to address the country’s principal challenges, including how to allocate the costs of the debt build up, compensate for the shrinkage in the real estate and infrastructure sectors, and boost household income and consumption permanently in a big shift from supply-side to demand-side reforms.

It would call for major initiatives affecting the tax system, social welfare, health and education provision, sales of public assets, a shift in priorities to private firms, and easier urban registration or “hukou” regulations.

Yet, in spite of China’s prioritising of what Xi calls “new productive forces” at the frontiers of science and technology – including AI, electric vehicles and batteries, and climate change mitigation – the root-and-branch overhaul and reform of China’s economic development model is a tall order for a Leninist system.

It requires the Communist Party to change the politics and the institutions of the country in ways that are difficult or impossible for it to embrace without putting its raison d’etre, to rule unchallenged, in jeopardy.

China’s economic outlook in the 2020s, therefore, and beyond is liable to be much more pedestrian, perhaps even including periods of economic and/or financial instability, and spreading the jobs malaise from the youth to the general population. Its economic heft and status in years to come look uncertain, potentially weakening Beijing’s case not just in the rest of the world, but also at home.

Xi’s seemingly safe autocratic position today is only as secure as the country’s economic performance and prospects. Change the latter, as increasingly seems likely, and the former is likely to be in play too.