How Long Can Xi Prioritize ‘Zero COVID’ over the Economy? – The Diplomat

How long can Xi prioritize 'Zero COVID' over the economy?

A flag with the logo of the Chinese Communist Party waving as people line up for the COVID-19 test at a test site in an office complex in Beijing, Friday, April 29, 2022.

Credit: AP Photo / Mark Schiefelbein

China’s fight with COVID-19 has entered a new round. Following the country’s most serious outbreak since the start of the pandemic, President Xi Jinping has instructed officials to redouble his signature “zero COVID” policy of rigorously testing, tracking and isolating positive cases. Based on the terminology of the Mao era, Xi declared that “perseverance is victory” in what he has called a “people’s war” against COVID-19.

Xi’s latest words also signal an unprecedented level of political sensitivity around his maximum strategy of repression. In a warning against dissent, Xi urged officials to “resolutely fight” against those who “distort, question, or disprove our nation’s pandemic policy of containment,” and convey a distinctly nationalist tone. This comes amid growing criticism of Beijing’s zero tolerance approach from both domestic and foreign observers.

Several prominent figures have recently been censored after making Bearish comments about China’s economy or questioning the legality of harsh measures. Even the director general of the World Health Organization has now fallen victim to Beijing’s anger after saying zero COVID was unsustainable.

At the same time, the foreign business sentiment has been declining rapidly. The number of European companies considering selling from China has more than doubled since the beginning of 2022. Meanwhile, the Japanese brokerage firm Nomura has identified zero COVID as the dominant obstacle to growth in China.

The language of Xi’s latest warning also suggests that there is some divergence on zero COVID within the Chinese Communist Party. Speaking to the Politburo Standing Committee on May 5, Xi’s comments were notable because they did not refer to the economic disruption of shutdowns. This is in contrast to previous statements by the Politburo, as well as recent comments from Prime Minister Li Keqiang and Deputy Prime Minister Hu Chunhua.

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Xi has sent a clear signal that he ultimately considers COVID-19 mitigation to be an even higher priority than the economy. This raises an important question: Given all the growing resistance and growing economic turmoil, why does China’s leader still feel the need to stick to such strict containment measures?

As I have explored before in The Diplomat, one of the reasons is a tale of systemic superiority that Beijing developed after its previous success in suppressing COVID-19. It would also be a significant risk for Xi Jinping to change course in this politically charged year in which he is expected to seek a convention-breaking third term in power.

But Xi’s renewed commitment to zero COVID makes sense for another reason. Over the course of nearly a decade in power, China’s leader has repeatedly shown a willingness to downplay economic growth in favor of political and social issues that he considers more urgent. Last year’s ‘common prosperity’ campaign to redistribute wealth is an example, while efforts to alleviate rural poverty and protect the environment also fit this calculation.

So far, these initiatives, in which Xi has sacrificed growth, have been facilitated by a clear sociopolitical rationale, strong stakeholder support and a stable economy. But zero COVID is now increasingly unable to depend on such favorable conditions. As the virus has become less deadly but more contagious, the logic of continuing with strict containment has weakened, policy support has waned, and the health of China’s economy appears to be deteriorating rapidly.

This should be of concern to the Chinese president. The economy is an important political battleground in any country, but especially China, where consistent growth has been a major source of political legitimacy since the late 1970s. Xi knows this, and his administration has generally shown that it will only fight political battles where there is the economic padding to do so.

Last year’s regulatory intervention exemplifies this political-economic interplay. Although hugely disruptive, the intervention was practically possible due to the relatively robust state of the economy at the time (as a statement from April 2021 made clear). Many citizens and government officials expressed support for efforts to curb monopolistic and invasive corporate practices. However, as growth has weakened, priorities have changed and Xi’s government appears to have paused its campaign against the “disorderly expansion of capital.”

So when can we see a similar inflection point in the calculation of zero COVID? Many expect a relaxation after the 20th National Party Congress, as recent precedent suggests may happen in October or November.

But while party congress is undoubtedly hugely important, any zero-sum U-turn can largely depend on China’s macroeconomic performance. Xi’s record suggests he will only sacrifice growth to the point that it does not threaten stability. And while the first-quarter indicators remained broadly stable, recent exports and employment figures paint an increasingly bleak picture of China’s economy.

If activity remains low for the next one or two quarters, the economic and social effects will begin to be felt much more acutely. It is precisely this kind of politically destabilizing scenario that Xi must avoid and which may ultimately force him to change direction on zero COVID.

William

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