Covid aftershocks shattered faith in China’s economy

China is suffering a crisis of confidence that can be traced back to the Covid-19 pandemic. Five years ago, a mysterious virus started circulating in the Chinese city of Wuhan. What followed was not only a quarantine of the victims but of crucial data that would spark a global alert. 

Cases across China started rising as the country was plunged into a lockdown after Wuhan was sealed off from the rest of the world. Other nations quickly followed as an eerie silence descended on the streets of global capitals. More than seven million people died worldwide.  

“The first thing [the Communist Party learned] was how to control public speech, how to arrest citizen journalists, block the internet, and create public opinion through paid-for international experts and media,” Qin Peng, an independent political commentator, said.

“The second thing was how to tame the public with the use of official narratives. The third was how to turn an incident for which they were responsible into a problem caused by somebody else … by blaming the United States or nature,” Qin told Radio Free Asia.

Seeing Red:

• By 2022, the Party’s right to rule was challenged by the “White Paper protests.”
• Demonstrations erupted across major cities, including Beijing, Shanghai and Wuhan, after two years of lockdowns.
• There was also an unprecedented wave of civil disobedience, posing a threat to the Party.
• Faced with anger on the streets, the nationwide lockdown was quickly lifted as Covid-19 deaths spiraled.

Number of Covid-19 deaths worldwide reported to WHO

Delve deeper: “People [had] irrational belief in the Party’s ability to govern. But from the extreme prevention and control measures right through to the way they relaxed restrictions with no preparation, we can see how inflexible their policies are,” Qin told RFA last week.

Between the lines: Disillusionment about the economy has only added to the risks facing President Xi Jinping’s regime. Rising unemployment among the young, ballooning government debt and a protracted property crisis have eroded trust in the Party.

Big picture: “[Beijing has] failed to deliver the economic recovery that everyone predicted after the [pandemic] restrictions were dropped, [damaging] the authority of the national government and Xi personally,” Qin said.

Bottom line: Gao Shanwen, the chief economist at SDIC Securities, told an event hosted by the Peterson Institute for International Economics in Washington last month that “we do not know the true number of China’s real growth figure and maybe other” data.

Why it matters: “[Many people speculate that] after the pandemic, those numbers may not be so accurate,” he said, as reported by Business Insider, adding that GDP in 2024 was around 3% and not the official figures of 5%.

China Factor comment: Comrade Xi and the Party face an existential economic emergency. How they handle slowing growth and declining public popularity, if they ever had it, will decide the country’s fate in the years ahead.