Newsletter 143 - December 4, 2022
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Welcome to the 143rd edition of Trade War.
Even as Beijing cracks down on the protests in cities around China, officials appear to be moving towards loosening up the hated Covid Zero restrictions.
That won’t be easy: infections are likely to soar and deaths from the virus could top 2 million, says researchers. It could also badly damage Xi Jinping’s favored narrative of China outshining the world in pandemic management.
In first comments on the protests, China’s leader says they were driven by students “frustrated” after three years of living with Covid. But demonstrations also reflect youth feeling left behind by the stagnating economy and alienated by China’s changing social contract.
The desire to see a less authoritarian China also behind protest unrest. Blank sheets of white paper become a symbol of defiance. Death of former top leader Jiang Zemin sparks a wave of nostalgic affection - while shining a light on what some see as Xi’s flaws.
In wake of Zhengzhou migrant protests, Apple accelerates plans to move production out of China and to Vietnam and India. And Chinese companies rush to register in Singapore to avoid getting caught up in China-US tensions.
Protests push Beijing toward Covid Zero easing
Even as Beijing throttles the anti-Covid lockdown protests that spread across the country and arrests many of the participants, the demonstrations have accomplished one thing: In a surprise about-face China’s leaders seem to be trying to move away from Covid Zero, and starting to loosen up the strict pandemic controls that have been slamming the economy.
Over the last few days, lockdowns were lifted in a number of districts in Guangzhou, site of some of the most violent and long-lasting clashes between migrant worker protesters and white hazmat suit-wearing riot police. In Beijing, officials announced that many of those who test positive for Covid will be able to quarantine at home. And in Chengdu and Tianjin, commuters will no longer have to show negative tests before riding the city subways. And finally, China is planning to soon reduce the frequency of mandatory mass testing and nucleic acid tests nationwide, sources have told Reuters.
“As the omicron variant becomes less pathogenic, more people get vaccinated and our experience in Covid prevention accumulates, our fight against the pandemic is at a new stage and it comes with new tasks,” said vice premier Sun Chunlan, the top official who has led the fight against Covid, on November 30.
“Sound like [an] obituary of Zero-Covid?” tweeted Council on Foreign Relations Senior Fellow for Global Health Yanzhong Huang.
Fear of health consequences
The costs of easing quickly however are sure to be high, with a dramatic surge in infections certain, and with estimates of likely mortalities ranging from 1.5 to over 2 million. And that could convince Beijing to once more backtrack on plans for opening.
“I remain a skeptic when it comes to China opening up soon. Not because the government doesn’t want to, but because they can’t for fear of the health consequences,” tweets Jorge Guajardo, a former Mexican ambassador to China.
Elderly are extremely vulnerable
“The elderly are extremely vulnerable. Only 40 percent have a booster jab. Dropping Zero Covid now might remove the main coordination mechanism of the protests and expose how broad/narrow the political demands are, but it would also be a public health disaster,” warns Adam Wolfe, Emerging Markets Economist at Absolute Strategy Research.
There goes Xi’s narrative of ‘grand success’
An additional serious challenge; the potential blow to the credibility of the Chinese Communist Party and its top leader.
“The other huge issue is Xi Jinping has associated himself so much with what he sees as a successful - what had been until not too long ago — it seemed like a successful Covid Zero policy,” I say on Complete Intelligence’s “The Week Ahead” podcast.
“They have really defined themselves in opposition or in contrast to the rest of the world. So if you watch the Chinese media, the state-run media, every time we’ve reached [in the United States] a new level of mortality, more than a million people have died, these things are top of the news in China.”
“The party has tried to tell the Chinese people you’re safe here, in contrast to the chaotic rest of the world and particularly chaotic America. This is their argument. And if they lift Covid Zero now, and . . . the pandemic rips through the population, and they do have high mortality, there goes out the window Xi Jinping’s narrative of the grand success of the CCP with Covid Zero.”
Watch the whole podcast for more insights including from Strategy Risk’s Isaac Stone Fish, Live Monitor, and Complete Intelligence founder Tony Nash.
Hope that China become less authoritarian
Policy-making with weakened political trust
This critical question is raised below: how will Beijing have to change its operating style in the future, with now diminished public trust in government institutions, as shown vividly over the last week? Will more arm-twisting or force be necessary?
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