December 2, 2022 - 7:00am

In the space of a few weeks, Xi Jinping has gone from an acclaimed leader to a man under pressure to restore public order and defuse anger over Zero Covid policies. A generation brought up on a politically sanitised version of history seems to be experiencing an awakening in increasingly fractious times. Chinese anger over Covid policy has acted as a lightning rod for accumulated angst about rising repression and even for opposition to Xi and the ubiquitous control of the CCP. The recently announced death of former leader Jiang Zemin, who was associated with happier times in China, couldn’t have come at more precarious time for Xi and the party.

This month’s Politburo meeting will have to steer China through the current upsurge in Covid cases over the winter, with the Chinese New Year holidays looming in just two months. Premature easing of policy could lead to an outbreak of infection and deaths, especially in a population that remains under-vaccinated and that has had relatively little exposure to the Covid pandemic. Repressive lockdowns, on the other hand, will surely fuel further unrest. 

Though the CCP has important public health and social control reasons not to abandon Zero Covid policies as such, it will likely try to make it more sustainable. This week, the National Health Commission said it would speed up the roll-out of vaccinations for older citizens and of initial boosters for two-thirds of over-80s. This followed the slight easing of Covid restrictions in the 20-point plan announced in early November.

For all the focus on Covid, though, we should also remember that these protests have activated frustrations extending beyond the virus. Recently, workers, students, and the middle class have been articulating slogans on subjects ranging from working conditions and unpaid wages to democracy and free speech, extending to outright opposition to Xi and the CCP.

Two things could further inflame the unrest. The first, still open to conjecture, is whether Zero Covid might divide the CCP. Local government party officials, for example, are under huge pressure to carry out an impossible array of tasks under major financial constraints. They bear the brunt of unpopularity for carrying out Beijing’s Zero Covid policies, and they also foot the bill for expensive mass testing programmes — estimated to cost about 1-1.5% of China’s $17 trillion GDP. Local tax revenues are dwindling as the property market sinks; welfare obligations will only rise, and policy choices are limited to even more debt issuance, public spending cuts, or sales of public assets and services.

The second, already a feature, is the weakness and latent instability in the wider economy, even without the effects of Zero Covid policies. China’s GDP growth has pretty much stalled, having halved first to about 5-6% a year during the 2010s, but, worryingly, is set to halve again in the 2020s. Periods of ‘recession with Chinese characteristics’ are starting to become common. Unemployment, which is improperly measured, may be significantly higher than the official rate of 5.5%, and youth unemployment, estimated at around 19%, carries the risk of significant adverse social consequences. 

At the moment, it is hard to see how conditions will improve in the short or medium term. Growth will remain under pressure from the deadweight of excessive indebtedness; the real estate market has to shrink; there is no strategy to boost consumption and services; a more Leninist governance regime is stymying private enterprise and initiative. Meanwhile, geopolitics is pushing economic decoupling or disengagement in supply chains, and in key areas such as semiconductors.

The nature of the CCP system is being revealed to citizens through a Covid lens, but the platform on which unrest might evolve is determined by other, more systemic, factors. The economy is in a poor state, with a rising risk of instability; the government and its critics are in a quandary over Zero Covid with a bias towards restraint; none of the policy options have favourable outcomes; and the entire economics and finance leadership team will be out of office and replaced primarily by loyalists next March. Stay tuned.

George Magnus an economist and author of Red Flags: Why Xi’s China is in Jeopardy. He is an Associate at the China Centre at Oxford University.