by Austin Williams
Monday, 2
January 2023
Analysis
08:00

China’s Covid policy has ravaged its economy

The country is no longer projected to overtake America this decade
by Austin Williams
A Covid-prevention worker guards the entrance of a residential compound placed under lockdown in Beijing in November 2022. Credit: Getty.

Extended lockdowns in Shanghai, Beijing, Guangzhou and other major Chinese cities have caused the Centre for Economics and Business Research to revise the predicted date that China will overtake the U.S. economy from 2028 to 2036. Just a generation ago China was a peasant economy, so the real story remains that it has managed to rival the American economy at all, not that it is delayed by eight years. 

In order to progress China is going to have to get back to work and hence to a semblance of normality. In doing so, China is fast becoming a global pariah, not for its authoritarianism and strict restrictions on personal mobility but now for opening up and allowing people to travel freely. 


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The pressure is mounting on world governments to demand pre-flight testing and quarantine for travellers leaving China. After the U.S., France and India imposed testing mandates, the UK fell into line. Whether Western nations are doing this as a precautionary response to a serious outbreak or just kicking China when it is down is hard to say, but the consequences could be significant for both sides.

As many people predicted, China’s zero-Covid lockdown strategy merely delayed the inevitable spread of the virus once it allowed itself to open up. The fact that there was no natural immunity — exacerbated by severe isolation and brutal quarantine incarceration together with an inadequate roll-out of an ineffective vaccine — has meant that the impact on health and the economy today is all the more brutal. 

In the last year alone, China’s industrial profits fell 3.6%; house sales (a major proportion of GDP) have slumped by as much as 30–35%. Retail sales fell by nearly 6% and national unemployment stands at 6.7% in the county’s 31 largest cities, while youth unemployment overall was around 18% at the end of 2022. 

The implications of this for China — if the evidence from the Western experience can be generalised — will be greater than the sum of its parts and will certainly be more profound than economic data alone can capture. 

Many Chinese people have retreated from society. The streets of major cities have been eerily empty, and fear is returning. As we have witnessed in the West, the end of lockdowns doesn’t put an end to the more insidious social malaise. 

At the moment, China’s economic recovery is being holed below the waterline by the toll on working lives and pressure on the hospital sector. People are ill and dying and unable to work in many situations. Factory workers have been told to return to work even if they have the virus, but such a stark reversal of the zero-Covid strategy simply exacerbates cynicism. 

Indeed, fewer people now blindly accept the word of established Communist Party apparatchiks, and after the heroic battles in November against citywide lockdowns there might emerge a demand for greater transparency and public engagement. For instance, who believes President Xi Jinping’s New Year message that “we have put the people first and put life first all along” or that “today’s China is a country brimming with vigour and vitality”?

Global events have prompted Western leaders to rethink their supply networks and trade partners. But supporting the nascent liberal ethos of urban protesters ought to be given a higher priority, rather than betraying them by effectively locking them down in their own country. 

The knee-jerk reaction of Western states to medically isolate Chinese travellers before viable alternatives are in place seems to be the mirror image of Beijing’s ending of lockdown without any ameliorative measures being introduced. Rather than celebrate China opening up, testing and quarantining its people will surely only exacerbate tensions. The impact that Covid has had on the Chinese domestic economy is obvious, but marginalising Chinese society while pretending that political relations and economic supply chains will be unaffected is a naïve belief whose implications will be felt far and wide.

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Prashant Kotak
Prashant Kotak
1 month ago

A lot of people, me included, brought into, and panicked about, the inexorable rise of China for a couple of decades. But, what is rapidly becoming clearer and clearer, is that China is a paper tiger, albeit a different kind of paper tiger to Russia.
Don’t get me wrong, China’s super-rapid rise to date in prosperity, wealth and power projection is absolutely real enough. But age demographics places an upper bound – the Chinese population is already older than many western countries on average, ageing rapidly, and set to decline hugely in absolute numbers over the coming couple of decades – thanks to the one child policy.
In a situation where they face technological blocks which they can’t get past quickly (not able to reverse engineer high end chips, or high end vaccines as the last two or three years have demonstrated), other factors have come to the fore.
They couldn’t bring themselves to buy western vaccines for political narrative reasons. They have shot their own high tech sectors up in a haze political panic about countervailing power centers forming to the CCP, and hubris based on the assumption that they could either reverse engineer and clone western tech as required or buy it. Well, it seems they can’t. Biden has kyboshed their technology assumptions even more than Trump did, and all of a sudden it becomes clear the extent to which China is dependent on inflows of energy, technology and raw materials and outflows of manufactured goods. In that situation, they have undone themselves with their ‘wolf warrior’ bellicosity, because other nations are not totally stupid and won’t allow themselves to be steamrolled. I wondered often over the last couple of decades why the European nations were so sanguine about China when it seemed to me the Chinese posed a huge systematic threat to westen democracy – well, it seems their judgement was sounder than I thought.

Last edited 1 month ago by Prashant Kotak
Steve Murray
Steve Murray
1 month ago
Reply to  Prashant Kotak

I agree with your analysis of China’s structural problems, but not your assertion that Western judgement was sounder. The Chinese have massively shot themselves in the foot through their inability to properly manage their bio-plant in Wuhan. Then they thought they could use Covid to gain further advantage by crippling the West whilst preserving their own economy.

The thing about the authoritarian mindset is that eventually, it leads to self-implosion, whilst democracies – however much we think we’re taking ourselves down – retain an ability for renewal. The entrepreneurial impulse which thrives only through relative freedom to create new tech just can’t be replicated.

It’ll be fascinating to see how this plays out, and what lessons both the CCP and the Chinese population take forward.

Last edited 30 days ago by Steve Murray
vladimir gorelov
vladimir gorelov
30 days ago
Reply to  Prashant Kotak

Why must you see others success as a systemic threat? And find reassurance in their weakness? Isn’t it perverse?

Mike Smith
Mike Smith
30 days ago

The CCP is a systemic threat: to its own people and to the world. Most people, Chinese or otherwise, are aware of how evil the CCP is.

P Branagan
P Branagan
29 days ago
Reply to  Mike Smith

“How much evidence is required before it is clear that Western Civilization is empty of integrity, judgment, reason, morality, empathy, compassion, self-awareness, truth, empty of everything that Western Civilization once respected?

All that is left of the West is insouciance and unrestrained evil.”

~Paul Craig Roberts, former Undersecretary Of Treasury, Reagan Administration

taek kenn
taek kenn
30 days ago

To answer your burning question:
No.
I presume your dear and sainted birthing person forgot to teach you that:
Life is not fair, never was and never will be.

Kerry Davie
Kerry Davie
29 days ago

As to the former, they are a systemic threat. As to the latter, well, that naturally follows from the first realisation.

Andrew Fisher
Andrew Fisher
25 days ago

It isn’t ‘China’ that is the problem, but a deeply cynical and in fact evil Leninist political system which considers all western Enlightenment, religious or philosophical virtues to be bogus and self serving. Of course Leninism is not in any way a traditional system of belief in Chinese civilisation, which was systematically trashed by Mao and his fanatical followers. The modern Chinese Communist state remains entirely unreformed.

Lenin was one of the most odious human beings who has ever lived, despite the naivety of a seemingly endless resupply of moronic western ‘useful idiots’, who, natch, vociferously hate Thatcher, Reagan, Churchill etc etc but have endless time and excuses for the tens of millions butchered by Lenin, Stalin, Mao, yes and lesser but nevertheless significant killers (once oh so fashionable) such as Giap and the various North Korean Kims. Leninists are not even actually really Marxists, as Lenin was far too impatient to wait for the correct stage of economic development in Marxist dogma for his bloody coup and subsequent massacres of anyone who stood in his way, including most socialists.

Leninists always have and always will be prepared to lie, cheat, murder and enslave on a grand scale. The only virtue they have is the preservation of their brutal and totalitarian control and probably ultimately one person rule. We don’t spend a lot of time considering whether we should have come to a sensible agreement with Hitler; why then apart from sheer slavish necessity perhaps, do we think precisely that about the CCP and Xi Jinping?

Last edited 25 days ago by Andrew Fisher
Ian Stewart
Ian Stewart
30 days ago
Reply to  Prashant Kotak

Their judgement was sounder? Or they are just lucky that China (accidentally?) created a biohazard for the world and then hubristically responded in extremis; and at the same time allied itself to a despot, Putin, who has broken his country.

I think our leaders were lucky.

Last edited 30 days ago by Ian Stewart
taek kenn
taek kenn
30 days ago
Reply to  Ian Stewart

“Puting has broken his country”
Really?
Must your forever be a beggar
Whose golden dreams will never come true.

P Branagan
P Branagan
29 days ago
Reply to  Ian Stewart

It was Fauci’s/NIH money that financed the Gain of Function research in the Wuhan Institute of Virology.

Andrew Fisher
Andrew Fisher
25 days ago
Reply to  P Branagan

The NIH funded some research, but by no means all of it. However the much bigger point is that rightly or wrongly, GOF research is not in itself illegal. Operating a biolab with less biosecurity than your typical dentist, and then systematically deleting the entire research database and engaging in an huge cover up is the far greater sin.

We are only be able to find out any of this because the US is still a significantly, if not entirely open society, with pretty effective freedom of information laws. Opposition is possible. China on the other hand is a brutal Leninist state which fundamentally protects the interests of the CCP leadership above everything else. It treats values such as openness, and human wellbeing in an entirely transactional way at, best, and with utter contempt as weak bourgeois afflictions (which however can be sometimes exploited) at worse. Hence the cynical accusations they make for example against US ‘racism’ as they imprison millions of Uyghurs, who are systematically discriminated against and even used as slave labour.

This point is constantly underplayed that sees China as a state like any other, albeit an authoritarian one.

Paul MacDonnell
Paul MacDonnell
30 days ago

I could not agree more.

D Walsh
D Walsh
30 days ago

I could not agree less

Jerry Carroll
Jerry Carroll
30 days ago

Why shouldn’t we be wary of the Chinese? Look what they’ve done.

P Branagan
P Branagan
29 days ago
Reply to  Jerry Carroll

It was the Yanks what done it – not the Chinese

Morgan Morgan
Morgan Morgan
30 days ago
D Walsh
D Walsh
1 month ago

I’m not sure the US will exist in its current form ten years from now, I think China will

Prashant Kotak
Prashant Kotak
1 month ago
Reply to  D Walsh

How do you think the CCP will get past the Chinese demographic bust on their doorstep?

D Walsh
D Walsh
30 days ago
Reply to  Prashant Kotak

Well they won’t import millions of low IQ people from the 3rd World thats for sure. China will still have the Worlds largest smart fraction, the US and the West will continue its slide to Idiocracy

Welcome to Costo, I love you. Welcome to Costco I love you, Welcome to…………

Warren Trees
Warren Trees
30 days ago
Reply to  D Walsh

It’s hard to argue against the Idiocracy comment. When politicians openly claim they never said things that are clearly documented online and in print, and a media doesn’t challenge them, it’s obvious that they believe we are idiots.

Last edited 30 days ago by Warren T
Josef O
Josef O
30 days ago
Reply to  D Walsh

Never underestimate the US. It has flaws obviously but it is able to regenerate fast and surprisingly.

Ian Stewart
Ian Stewart
30 days ago
Reply to  Josef O

Yup, it’s an amazing country and culture. How it came about with this resilient capability from the various roots is fascinating.

D Walsh
D Walsh
30 days ago
Reply to  Josef O

Its a country where reform is no longer possible. they have reached the looting phase of empire

Ian Stewart
Ian Stewart
30 days ago
Reply to  D Walsh

The Simpsons did an episode about your views – it was very funny.