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Newsletter 143 - December 4, 2022

Dexter Roberts
Dec 04, 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.

Twitter avatar for @YanzhongHuang
Yanzhong Huang @YanzhongHuang
Sound like obituary of zero-Covid? VP Sun Chunlan: "With the weakening of the pathogenicity of Omicron, the popularization of vaccination, and the accumulation of prevention & control experience, our country's epidemic prevention & control is facing new situations and new tasks."
3:22 PM ∙ Nov 30, 2022
68Likes18Retweets

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.

Twitter avatar for @jorge_guajardo
Jorge Guajardo @jorge_guajardo
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.
bloomberg.comBloomberg - Are you a robot?
3:24 PM ∙ Dec 1, 2022
8Likes5Retweets

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.

Twitter avatar for @adamkwolfe
adam wolfe @adamkwolfe
But the elderly are extremely vulnerable. Only 40% 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. 2/
Image
5:27 PM ∙ Nov 28, 2022
25Likes3Retweets

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.

Twitter avatar for @complete_intel
Complete Intelligence @complete_intel
.@dtiffroberts says that Xi Jinping associated himself too much with a "successful" Covid Zero, which as it turned out not really a grand success. Watch the full discussion on Youtube: youtu.be/4duLSGnO-Og 👉 Get 50% off on CI Futures. Explore options: completeintel.com/inflationbuster
4:39 AM ∙ Dec 3, 2022
4Likes1Retweet

Hope that China become less authoritarian

“The larger issue is hopes [by the protesters] that China will become less authoritarian,” I say to media company Newsy’s Chance Seales. You can watch the full show that aired on Monday here.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
Enjoyed the chance to talk about the China protests on @Newsy with @chanceseales youtu.be/noDD2knTl5w via @YouTube
youtu.beDexter Roberts on Newsy Tonight with Chance Seales: The China ProtestsMansfield Center and Atlantic Council senior fellow Dexter Roberts joins Chance Seales to discuss the protests in China and what impact they will have. Broad...
3:00 AM ∙ Dec 2, 2022
3Likes2Retweets

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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