Covid-19 curbs leave China’s economy creaking
President Xi Jinping’s ideological push is wrecking the country’s manufacturing base and stifling consumer demand
China’s economy continues to creak as President Xi Jinping’s oppressive “zero-Covid” policy and security crackdown wreak havoc across the country.
Manufacturing confidence has evaporated while the service sector is still in free fall amid self-inflicted wounds from the “chairman of everything.”
Last week, at least 31 cities and more than 200 million people became victims of Xi’s inflexible strategy to combat small Covid-19 outbreaks if you believe Beijing’s official numbers.
Coupled with ballooning local government debt, a real estate meltdown and surging unemployment among young job seekers, the world’s second-largest economy is in dire straits.
“With the zero-Covid policy here to stay, we think the economy will continue to struggle heading into 2023,” Zichun Huang, an economist at Capital Economics, said in a research note.
“We don’t expect the policy to be abandoned until 2024, which means virus disruptions will keep in-person services activity subdued,” she added.
Xi has packed his inner circle with “Xicophants” as ideology linked to state security trumps the economy.
Behind the numbers:
- The official manufacturing purchasing managers’ index or PMI dipped to 49.2 in October.
- That was down on the 50.1 figure the previous month, the National Bureau of Statistics reported.
- China’s service sector PMI also fell to 48.7 from 50.6 in September.
- The 50-point mark separates growth from contraction.
Delve deeper: Factories have had to slash jobs in a move to reduce costs, fueling already high unemployment. The knock-on effect has been a sharp decline in consumer confidence.
Between the lines: At the weekend, “workers” staged an “exodus from the world’s largest iPhone factory” at Foxconn’s massive complex in the central Chinese city of Zhengzhou.
Covid protest: The Financial Times reported that the stampede was triggered by local authorities after they imposed tough zero-Covid restrictions.
Big picture: “The economy-centered era is over,” Guoguang Wu, an academic at Stanford University’s Center on China’s Economy and Institutions, said in The Journal of Democracy.
China Factor comment: Xi has packed his inner circle with “Xicophants” as ideology linked to state security trumps the economy. The policy shift comes amid tightening control at home and rising nationalistic rhetoric abroad.