Headlines in today’s financial news include items like “Clashes in Shanghai as COVID protests flare across China“ from Yahoo Finance. There have been widespread protests this week, which are normally a rarity under the authoritarian regime, and are being suppressed by any means necessary. Apple stock is down about 4% in the past two trading days on fears that iPhone shortages will get worse due to worker unrest in the giant Foxconn factory in Zhengzhou. Wall Street keeps hoping the China will loosen up, since the lockdowns on the world’s second-largest economy are a drag on global markets.
China has pursued a “zero-COVID” policy, of strict mass lockdowns to halt any spread of the virus. Residents have been confined to their apartments for over 3 months in some cases. Whole cities with tens of millions of people have been locked down for months at a time whenever a number of cases are spotted. China’s economic growth has stagnated, and unemployment among young people has risen to 20%, which has helped fuel unrest. Chinese people are aware that the rest of the world has moved on from mass lockdowns, and may be realizing the futility of thinking that lockdowns can stave off the virus indefinitely.
Given its discomfort with widespread discontent and protests, why does the Chinese government persist in this policy? An article in the Atlantic by Michael Shuman answers that question: “Zero COVID Has Outlived Its Usefulness. Here’s Why China Is Still Enforcing It. “ Back in 2020 when COVID first swept through the world, the strict lockdowns (readily enforced in an authoritarian regime) seemed like a big win for the Chinese leadership:
When the outbreak began in Wuhan in early 2020, the virus was unknown, vaccines were unavailable, and China’s poorly equipped health system could have quickly become overwhelmed by a sweeping pandemic. Yet the policy had a political element from the very beginning as well. The Communist Party is adept at sniffing out threats to its rule, and it quickly identified COVID as one of them. A major public-health crisis, with millions dying, would have raised serious doubts about the regime’s competence, which is, in effect, its sole claim to legitimacy.
Worse, the party could have faced a populace that directly blamed it for the outbreak—with good reason. The Chinese authorities at both the national and local levels botched their initial response to the novel coronavirus, suppressing information about its discovery by a Wuhan doctor and acting far too slowly to contain the initial spread. Sensing its potential vulnerability, the party shifted into anti-COVID overdrive, shutting down large swaths of the country, with the result that it did succeed in snuffing out an epidemic in a matter of weeks, even as it spread to the rest of the world.
That success allowed the Communist Party to transform a potential tragedy into a public-relations triumph. Within weeks of the Wuhan outbreak, China’s propaganda machine was touting the wonders of its virus-busting methods. And as the U.S. and other Western countries struggled to contain the disease, Beijing’s big win became even more valuable as evidence that its authoritarian system was more capable and caring than any democratic one. Beijing and its advocates pointed to rising case and death counts in the U.S. as proof of China’s superiority and American decline.
A number of other countries including Australia and New Zealand also implemented strict (stricter than in the U.S.) lockdown measures in 2020, and, like China, experienced far less impact from the virus in that timeframe than seen in the U.S. However, most of these measures were lifted in 2021. The widespread application of mRNA vaccines like those from Pfizer and Moderna in the West has served to mitigate the severity of the viral infection. Also, some measure of herd immunity has been achieved by the widespread exposure to COVID in the population; antibodies persist for at least eight months after contracting the disease. So, what’s up with China?
China has resisted using Western vaccines, relying instead on homegrown vaccines which are less effective, though they do give some measure of protection. Also, “The additional layers of high-tech surveillance adopted in the name of pandemic prevention can be used to enhance the tracking and monitoring of the populace more generally,” which is another win for the government. However, the major factor is that the Party, and especially President Xi, cannot afford to loosen up now and risk an embarrassing explosion of cases that would overburden the healthcare system and probably lead to millions of deaths:
The victory of zero COVID was claimed not just as the party’s but as Xi Jinping’s in particular. The State Council, China’s highest governing body, declared in a 2020 white paper that Xi had “taken personal command, planned the response, overseen the general situation and acted decisively, pointing the way forward in the fight against the epidemic.”
This narrative became entrenched. If Beijing loosened up and allowed COVID to run amok, the Chinese system would appear no better than those of loser democracies, and Xi would seem like another failing politician, a mere mortal, not the virus-fighting superhero he was painted as. Zero COVID’s failure would be a disaster for the Communist Party’s veneer of infallibility.
So the leadership insists on zero COVID and damn the consequences.
Economist Writing Every Day 