China’s economy pays the price of Party paranoia

President Xi Jinping’s “zero-Covid” policy is becoming more virulent than the silent microscopic enemy known as SARS-CoV-2.

Nearly two years of flash lockdowns have left China’s economy in intensive care after the Covid-19 crisis first surfaced in Wuhan back in 2019.

Since then, a small number of official cases have triggered mass testing. Residents in infected areas have been confined to their homes and businesses forced to shut up shop.

The shockwaves of this strategy have left the country on the brink of recession. For the rest of the world, it has only deepened the economic problems of soaring energy prices and ballooning inflation.

“Almost anything China does has global fallout these days,” Richard McGregor, of the Lowy Institute in Sydney, said.

“But its internal debates and its decision-making processes are almost entirely hidden,” he wrote in an essay, entitled Xi Jinping’s Radical Secrecy, in The Atlantic last month.

At the heart of this “secrecy,” which borders on paranoia, is Xi, comically known as the president of everything. Dictatorial in style, the general secretary of the ruling Communist Party faces a myriad of risks ahead of the 20th National Congress in October.

China’s economic stabilization and rebound are at a key window.

Yang Yinkai, the deputy secretary general of the National Development and Reform Commission

Year of living dangerously:

• Xi is expected to be handed an unprecedented third term by the Party elites in Beijing.
• But it comes at a time when China is facing an economic crisis on an unparalleled scale.
• Unemployment among young people is soaring, the property sector is in meltdown and consumer spending is on life-support.
• Big business is also suffering a crisis of confidence as factory activity declines.
• On top of this, Xi’s draconian “zero-Covid” strategy has triggered rare public protests.

Delve deeper: “Some 60 million people in China are facing more Covid lockdowns, from Chengdu to Shenzhen to Daqing. Weariness is growing,” The New York Times reported on Tuesday.

Rising tension: “China’s pandemic curbs and geopolitical tensions with the United States continue to disrupt supply chains. Rising inflation is also hurting domestic demand across Asia,” Toru Nishihama, the chief economist at Dai-ichi Life Research Institute in Tokyo, said as reported by Reuters last week.

View from Beijing: “China’s economic stabilization and rebound are at a key window. The second half of the year is critical to make up for the losses in the second quarter due to Covid outbreaks,” Yang Yinkai, the deputy secretary general of the National Development and Reform Commission, told a news briefing on Monday.

China Factor comment: An old economic joke was that if the United States sneezed, the rest of the world caught a cold. Now, it is a case of if China coughs, the rest of us catch pneumonia. And no one is laughing.