Red flags abound in China’s troubled economy 

With the unplanned and abrupt lifting of international travel restriction, the Chinese Communist Party is exposing the world to another wave of Covid infection.

China’s economy is in trouble and no amount of communist propaganda can cover up this fact.  Xi Jinping, molding himself after Mao Zedong and ruling over a totalitarian regime, initiated a series of self-inflicted crises including crackdowns on capitalism, failed zero-Covid policy and its abrupt and unplanned abandonment, all of which devasted the economy, leaving it with high unemployment, low consumption and an unprecedented rate of capital outflow.

These failures of Xi signaled that a totalitarian approach is not congruent with powering economic growth, promoting a prosperous society, and bettering people’s livelihood.  Even Apple, a big investor and employer in China, has moved parts of its supply chains to India and Vietnam.  In China, totalitarianism backfires and generates popular resentment nationally and we see the manifestation in students and labor protests and a troubled economy.

Official figures released by the Communist Party of China (CCP) showed the economy grew only three percent in 2022, which was much less than in 2021 and far from the target of 5.5 percent.  Other than in 2020 when the Covid-19 virus originated and broke out from the Chinese city of Wuhan, the economy in 2022 performed the worst in decades. 

A noteworthy fact is that party officials are known to fake and manipulate statistics for propaganda purposes.  Therefore, it is suspected that actual growth was lower than three percent.

The unscientific zero-Covid policy and its draconian and over-zealous execution choked the already weakened economy from Xi’s crackdowns on the private sector, with constant mass lockdowns, quarantines and Covid tests, which put a tremendous strain on people’s lives and livelihoods.  

The pent-up frustrations broke in late November 2022 when protests erupted all over China, demanding an end to Covid restrictions.  Xi succumbed to the demand and on December 7, he lifted all restrictions without warning after nearly three years. 

However, this policy reversal by Xi has dealt another blow to the economy because within weeks, there was a deadly outbreak that swept across the country with lightning speed.  The virus had infected hundreds of millions of people, killed many older citizens and left commercial enterprises, including the all-important factories, empty of workers and customers.  

On January 21, Wu Zunyou, chief epidemiologist of the Center for Disease Control and Prevention, said 80 percent of the population of 1.4 billion people were now infected.  The spread of the virus will only continue throughout the Lunar New Year holiday when hundreds of millions of Chinese citizens traveled across the country to visit family, often moving from cities to the countryside.  The abrupt abandonment of the zero-Covid policy exposed a government ill prepared for an explosion in infections. 

At the same time, for the first time in three years, Chinese citizens were now able to embark on international travel and therefore, suddenly, a highly infected proportion, potentially numbering in the hundreds of millions, has been let loose upon the world.  

This irresponsible action, and CCP apologists have argued that it would revive the tourism industry, poses a high risk to residents of other countries which had taken painful and arduous but necessary steps for reopening their borders. 

The point is, the CCP, always touting itself as a global superpower and demanding respect that goes with this status, is being highly unethical in resuming Chinese tourism without a plan as Covid-19 cases soared within the country.  

Xi refuses to import the highly effective western-made mRNA vaccines and to push for mass vaccination, which should be the right thing to do before opening up international travel.  In Xi’s calculus, it may very well be to ease off three years of heavy burden on the over-stretch public health infrastructure and to head off more protests, which can destabilize his rule.

Xi does not care about what is right or wrong but instead is bend on prioritizing what is necessary to maintain his own political power.  China, under Xi’s totalitarian rule, does not seem ready to be a responsible member of the global community.

This unplanned and sudden opening is another example of Xi’s numerous self-inflicted missteps, which importantly, not only has the potential to put a brake to the current hard-won global economic growth, and give rise to another round of devastating wave of Covid infection but will also further dent China’s already diminished reputation and leave a bad taste in the mouth.

Ironically, there are now more protests, leading to a serious social and economic fallout.  With the collapse of the vast apparatus and companies which helped the government executed zero-Covid, workers were abruptly retrenched and left without jobs.  Many of them were even not paid in prior months. 

To release their anger at the perceived injustice, they lashed out and went out onto the streets to protest.  Often the protests were violent as they concerned bread and butter issues.  It is speculated that these protests will portend more unrest to come moving forward in 2023.

Chinese workers are known to have very limited labor rights or recourse to resolve wage dispute and job grievances, and the only way to attract attention to their cause is to protest.  Be that as it may, the authority takes a dim view of this kind of behavior and the police usually clamps down hard on protesters.

Additionally, on January 17, it was reported that for the first time since the early 1960s, the total population declined by 850,000. At the same time, the age of the population is rising.  This means the Chinese economy, the world’s second biggest economy, also known as the factory of the world, does not have enough workers to do the work anymore.  There is now a shrinking and aging society with a rising number of retired elderly people who need state support while the working population which supports them through taxes or other measures declines.  

It certainly seems like 2023 will not be a good year for Xi Jinping as the Chinese economy does not have enough gas in the tank to power more growth.

Photo credit: iStock/ Luca Ferrara. Empty street in Changan Avenue, Beijing.

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