Xpeng (NASDAQ:XPEV) stock rose 6% on Aug. 16 as hopes for economic stimulus in China rose.

Other Chinese auto stocks also did well. Nio (NYSE:NIO) rose 5%. Li Auto (NASDAQ:LI) rose 4%. Polestar (NASDAQ:PSNY), based in Sweden but controlled by China’s Geely (OTCMKTS:GELYF), rose nearly 2%. But BYD (OTCMKTS:BYDDF), China’s largest car company, fell 2.5%.

Xpeng is considered the weakest of China’s EV companies. It delivered 41,435 vehicles in the first half of 2023. Xpeng recently signed an alliance with Germany’s Volkswagen (OTCMKTS:VWAGY).

China’s Struggles and Chairman Xi’s Plans

China’s goal for 2023 has been 5% growth, but it is falling behind the target. The catch-up plan is to expand domestic demand for big-ticket items like cars.

China’s central bank cut its benchmark interest rate to 2.5%, the steepest cut since 2020. Economic weakness seems clear to international economists, but the government is now hiding data about it.

Western pundits now say President Xi Jinping is getting in the way of economic growth.

Xi called for “patience” in a speech published in Qiushi, the Chinese Communist Party’s theoretical journal. The speech was printed after data released on Aug. 15 showed economic activity weakened in July. The speech didn’t address the problem of youth unemployment.

Over the past few years, Xi has been expanding and cementing his power as an authoritarian leader, like Russia’s Vladimir Putin. This follows brutal crackdowns in Xinjiang and Hong Kong and provocative military moves off Taiwan and in the South China Sea. Xi’s speech was reportedly given to top party cadres in February. It called common prosperity goals a “long-term mission.”

XPEV Stock: What Happens Next?

Xi’s long turn to authoritarianism is the biggest story of the decade. It amounts to a reversal of policies that brought most Chinese into the middle class. Talk of war is increasing, and it is threatening the country’s economic success story. More stimulus would be a short-term boon for Chinese auto and EV stocks, like XPEV stock, but a war would be overwhelmingly devastating.

As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.