It’s all about the economy, Comrade Xi Jinping. In his stubborn pursuit of a zero-Covid policy, an unrealistic measure not based on science and medicine, Xi is doubling down on political control above all else, no matter the cost, to the detriment of the economy. All across China, cities are locked down.
A Chinese University of Hong Kong professor, Zheng Michael Song, said that the lockdowns are likely costing the country at least US$46 billion a month, or 3.1 percent of GDP, in lost economic output. The figure can increase, especially in economically critical cities such as Shanghai.
At the beginning of April, Xi sealed off Shanghai, an international financial center and global manufacturing hub with one of the world’s busiest seaports and airports. The heavy-handed lockdown has damaged China’s economy, the world’s second largest, tarnished China’s already battered international reputation and caused global supply chain disruptions. If even an important city like Shanghai can be sacrifice, it is not hard to imagine how far Xi will go to consolidate his control.
In scenes reminiscent of the Great Leap Forward, Great Famine and Cultural Revolution in the Mao era, all man-made disasters that killed millions, Chinese citizens are now going hungry in Shanghai in 2022. Because they are forcibly restrained in their movement, residents are not able to access food, basic supplies and even medical care during life-threatening emergencies.
Xi is going backwards in time instead of looking forward to the future. Xi’s Mao-inspired zero-Covid policy does not work to contain the more infectious but mild Omicron variant. To successfully fight any outbreaks, history has shown that science-based vaccines and medications are the best bets to end pandemic. Not the CCP’s daily mass testing, quarantine and lockdown, and certainly not a zero-Covid policy.
The lockdowns have put a brake on consumption, led to high unemployment and increased uncertainties about future growth. Xi’s actions, including his recent crackdowns on private enterprise and now his zero-Covid policy, have planted doubts in the minds of CEOs and investors about the viability of doing business with and in China.
Foreign investors are moving their money out, companies are moving their regional offices to other countries and expatriates are leaving in droves. According to the Institute of International Finance, capital flight by foreign investors amounted to US$17.5 billion in March, $11.2 billion in bonds and the rest in equities. Singapore, which lifted all Covid-19 restrictions and is treating Covid-19 as an endemic, is a beneficiary of this exodus.
Of course, Xi and the Chinese Communist Party (CCP) knew of the heavy cost to the economy, but in their calculus, that is a price they are willing to pay in order to achieve the political aim of exerting a tight control over everything in China.
From the CCP’s perspective, this is the only way for them to ensure the survival of their totalitarian regime. This is why despite what the CCP claimed to democratic countries and media, Communist China is never going to embrace democracy, freedom of speech, human rights, free elections and other universal values because by doing so will threaten their reign.
In Communist China, everything is politicized. Due to the CCP’s ingrained political inclination to use class struggle against anyone and anything that they deem to threaten their rule, in this case the Covid-19 virus, Xi is spinning a narrative that his zero-Covid policy is defeating the virus. And it seems Xi is winning the domestic propaganda war as support for zero Covid remains high in much of China.
Therefore, Xi is not going to reverse his zero-Covid policy. After the virus was first detected in Wuhan, he engaged in disinformation campaigns and blamed the U.S for bringing the virus into China, touted the superior governance of his totalitarian regime in eradicating the virus, and attacked the more effective but western-made mRNA vaccines while exaggerated the success of the locally-made but not effective vaccines.
After whipping up nationalistic fervor and turning the Chinese population against “foreign imperialism”, Xi will take his propaganda to a logical end, i.e., the victory of his zero-Covid policy and censor out whatever inconvenient truth may be out there. However, this will have the effect of imposing instability and uncertainty to the business environment.
Global CEOs and investors do not appreciate investing in an opaque environment where politics takes precedent over everything else and where the risks have now overshadowed the potential to make a profit. They do not want to play regulatory guessing games or worry about which private sector Xi is going to crack down on tomorrow. In short, CEOs and investors do not want their money and investment to be collateral damage in Xi’s “revolutionary struggles”.
Photo credit: iStock/Robert Way