In recent weeks, some Chinese government officials and political advisers, worried about the economic impact of Covid’s endless blockades in the country, have begun to cite the private example of a fourth-century BC physician. Bian Quet.
According to legend, Bian Cue warned a local ruler that he had contracted a disease that required immediate treatment. But the ruler insisted that his health was good, even when the disease seeped into his bone marrow, sealing his fate.
President Xi Jinping, officials and political advisers warn, may be just as ignorant of the possible consequences of his Zero Covid policy, which has forced Shanghai’s 26 million people into a draconian, five-week blockade that many may now fear repeated in Beijing.
The stakes are high for Xi, who is seeking an unprecedented third term as leader of the Chinese Communist Party, State and Army later this year. His carefully cultivated image of a strong and competent leader could be severely tarnished if the government loses control of Covid – or is mistaken for an economic crisis while trying to control it.
Weijian Shan, a veteran Chinese investor, said in a recent video meeting that the country is embroiled in a man-made crisis. “Much of China’s economy, including Shanghai, is semi-paralyzed and the impact on the economy will be very deep,” Shang said. “[China’s leaders] they think they know the market better and many of them [their] the actions have caused real damage to the market and the economy. “
A government policy adviser, who asked not to be identified, said that making Si realize that its previous successful zero-Covid policy may not withstand the highly contagious version of Omicron without devastating economic costs is now a “key challenge for the system “.
“People are telling Si that blocking is a problem, but I don’t think they’re saying how much of a concern it really is,” the adviser said. “He is so proud of China’s achievements in the fight against Covid that I don’t think he is worried about the economy.
“I don’t think Omicron will be limited, but that’s what the great leader said, so people are making decisions based on that assumption,” he said, adding that the situation in China is worse now than it was when Covid first spread in early 2020
At key moments during the blockade in Shanghai, Xi seemed deaf at best, at worst ignorant of the conditions in China’s most important financial and industrial center.
Almost empty roads during blockade due to Covid-19 in Shanghai, China, on Thursday, April 21, 2022. © Qilai Shen / Bloomberg
On April 8, when it became clear that the blockade of Shanghai would be extended long after the originally planned 10 days and residents struggled to ensure adequate food supplies, Xi met with the country’s Winter Olympians. The president, state media reported, “caused a lot of laughter and applause” when he referred to the comments of Eileen Gu, the US-born ski star who now represents China, about how much she “likes to eat Chinese pies”.
Three weeks later, in a televised address to China’s main international forum in the southern province of Hainan, Xi did not mention the growing Covid epidemics, but instead focused on how “the foundations of the Chinese economy – its strong resilience, huge potential and long-term sustainability – remain unchanged. “
A Chinese planning official told the Financial Times that some senior leaders, skeptical of data collected by the National Bureau of Statistics, are increasingly turning to their own personal networks to question heads of state-owned and private sector companies about the real situation. of the economy. He added that Deputy Prime Minister Han Zheng, whose portfolio includes a growing and struggling real estate sector, is now closely monitoring new home registration data collected by local housing offices.
However, Khan disagreed with Xi’s chief financial advisers, led by Deputy Prime Minister Liu He, on how to respond to China’s economic challenges. Liu, who is worried about the potential impact on the financial system, has repeatedly tried to reassure investors that the Xi administration will act to stimulate the economy.
But the guarantees did not lead to detailed follow-up, and the space for leaders to change monetary policy is limited by fears of inflation and capital flight as US interest rates rise above Chinese ones.
Speaking at an economic conference on Tuesday, Si promised accelerated investment in a number of critical infrastructure sectors, but did not provide a time frame or total effort.
Jörg Wutke, head of the European Chamber of Commerce in China, says Liu’s reputation as the government’s most competent economic official – and his strongest supporter of market-oriented reforms – has been “damaged”. “Investors followed suit [Liu] almost blind for years [but] he is no longer able to implement important things in his own system, “Vutke said.
Eswar Prasad, a finance expert in China at Cornell University, said Zero Covid’s policy had “severely limited” the macroeconomic instruments that Beijing had.
“The Chinese government is trying to use limited and targeted monetary and fiscal measures to support growth, while maintaining inflation, financial risk and currency devaluation,” Prasad said. “It would be difficult to juggle in the best of circumstances, but it’s even more so when the economy is already squeaking.
With the advent of Xi’s crusade without Covid, the suffering in Shanghai intensified. A local middle-class professional, who asked not to be identified, said he kept a packed suitcase ready in case she was called to a centralized quarantine facility.
“It reminds me of Dmitry Shostakovich,” she said, referring to one of the Soviet Union’s most famous composers. “Every night he waited for the KGB, listening carefully for footsteps and an elevator [noises]. I guess that’s why his Jazz Orchestra № 2 [suite] hovering in my head these days. ”
Shanghai’s predicament has given it a new assessment of the democratic systems of government so despised by Xi. “Democracy cannot guarantee the best governance, but it can prevent the worst from happening. This is enough.”
Additional reports by Tabi Kinder in Hong Kong
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