Xi Jinping Leading China Over A Zero COVID Cliff
Can The Middle Kingdom Survive The Economic Fallout?
Give China’s cultural pre-eminence on the importance of “saving face”, we cannot expect Xi Jinping to state the obvious truth about his Zero COVID policies: they have failed to stop COVID-19 from spreading within China.
For the same reason, it should perhaps come as no surprises that Xi has defended Zero COVID publicly, insisting the policy will “stand the test of time” and be proven right in the end.
President Xi Jinping has spoken out for the first time on China’s handling of the Covid-19 outbreak in Shanghai, saying it “will stand the test of time” and pledged to fight any attempt to “distort, question and challenge” the country’s policies.
Xi’s stubborn insistence on Zero COVID dismisses the very real humanitarian catastrophe that is the still-locked down city of Shanghai.
Despite case counts having declined from record highs in that city, officials show no indication of any significant easing of the Zero COVID lockdown protocols.
But the Shanghai lockdown has prompted a public outcry as residents complained of food shortages, difficulties in gaining medical treatment and fences being set up outside residential buildings to stop residents leaving.
Nearly 600,000 people in the city have been tested positive since March and close to 19 million were still under lockdown on Thursday.
After more than a month of being forced to stay at home, cases have begun to fall.
The failure of Zero COVID to contain the disease is immediately obvious from the chronology of Shanghai’s lockdown—with over a month of lockdown protocols elapsing before daily case counts begin to recede, a majority of cases in that city occurred after the lockdowns began, and the peak occurred well after the point at which the lockdowns should have disrupted disease transmission, even accounting for the disease’ 5-14 day incubation period.
It should be noted that this was also true of the original Wuhan lockdown in early 2020, where the lockdowns also failed to stop community spread.
Officials Recognize The Economic Damage, But Stick With Zero COVID Regardless
Surprisingly, Xi is doubling down on Zero COVID even as other officials acknowledge the economic fallout from the strategy.
Premier Li Keqiang in a teleconference with other top officials pledged on Saturday to support "as many employers as possible," especially among small and midsize firms, to keep people in their jobs, state media reported.
China's jobless rate stood at 5.8% in March, the highest since May 2020, while that in 31 major cities hit a record 6.0%. April's full lockdown of Shanghai and stricter curbs elsewhere have since further pummelled the job market.
China’s financial markets reflect the mordant state of the Chinese economy, with all the major stock indices posting double-digit declines since the start of 2022.
China’s flagging economy is also being reflected globally, as the lockdown periods coincide with a dramatic weakening of the Chinese yuan against the US Dollar.
The yuan’s decline is in large measure the result of a major slowdown in both exports and imports.
Export growth in April slowed to 3.9% in dollar terms from a year earlier, compared to an increase in March of 14.7%, customs data showed Monday. That’s the weakest pace since June 2020 but faster than the median estimate of a 2.7% gain in a Bloomberg survey of economists.
Imports were unchanged in April after sliding 0.1% in the previous month. Economists expected a 3% decline.
China, long styled as “the world’s factory”, is quite simply slowing to a standstill, economically speaking.
All this is happening right in front of Xi Jinping’s eyes—right in front of the entire Chinese Politburo—yet there has been no evidence Xi is even somewhat counting the cost of the failed (and failing) Zero COVID policies.
Zero COVID: Faucism With Chinese Characteristics
Zero COVID has served to accelerate trends that were causing China to lose manufacturing jobs to Southeast Asia and elsewhere even before the pandemic. For a number of years, there has been a steady migration of manufacturing away from China to labor markets with even cheaper labor—China has not been the “least cost” producer of goods for quite some time. Labor markets such as Vietnam and India now have the added benefit of not being governed by demonstrable psychopaths.
Despite China’s dogged insistence that Zero COVID is grounded in science, the reality of Zero COVID has instead been the epitome of Faucism. The policy is sustained not because of its scientific merits, but because the Chinese Communist Party, from Xi Jinping on down, dare not suffer the loss of face attendant upon admitting the policy was a mistake.
The CCP, from Xi Jinping on down, continues to defend Zero COVID even in the face of its obvious devastation of the Chinese economy—devastation Chinese officials reluctantly concede is happening. Promises of “stimulus” measures to goose economic performance would be unnecessary if China’s economy were in anything approaching rude health.
Yet even the stimulus measures are doomed to fail. When Chinese workers are forbidden to leave their homes to go work in China’s factories, the factories will remain idle. There is no stimulus measure that can have any effect when Zero COVID erects a barrier between the Chinese workplace and the Chinese worker. It is sheer lunacy for the CCP to pretend otherwise.
Xi Jinping sees all of this reality. The Beijing Politburo sees all the economic data, as well as the scenes of social unrest and protest, that have been shared in this Substack and across social media. They know full well the impacts of Zero COVID, for it is literally all around them.
Yet Xi Jinping has made it clear there will be no deviation, no unwinding of the Zero COVID policy. Zero COVID will remain in effect throughout China until the virus is defeated, consequences be damned.
The ultimate consequence for China will be Xi Jinping leading the nation right over a COVID cliff into economic and political turmoil and chaos.