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.