Tag Archives: Coronavirus

China Cracks Down On Zero-Covid Protests, Hints At Exit Strategy

AUTHORITIES ARE CRACKING down on those involved in the weekend’s protests against China’s zero-Covid policy. By the standards of these things, they are taking a relatively light-handed, although still firm, approach.

Heavy police presence and the closure of streets where demonstrators had planned to gather averted a third day of protests in Shanghai, Beijing, Wuhan and other cities around the country. Authorities have questioned known protestors, tracking some down to their homes, but reports suggest those detained are being released the same day. Nonetheless, the warnings will have been sent. The censorship of social media has gone into overdrive.

The elimination of independent media and non-governmental organisations, critical conduits for turning popular discontent into organised political action in autocratic and semi-autocratic states, always made it unlikely that the weekend’s protests would develop into something more threatening to the leadership in Beijing.

The scale of the numbers taking to the streets will likely have caused surprise and concern, and the widespread student involvement may have been more alarming, given the historical role of student protest in Chinese politics. Nonetheless, neither would have been seen as being beyond the capabilities of a well-honed security apparatus to suppress.

State media are now spinning a narrative that the worst abuses of the zero-Covid regime are the responsibility of over-zealous local officials, not the central government, the target of some protestors’ ire over the weekend. Exemplary punishments for some hapless local officials can be expected.

Public health officials are reiterating that the zero-Covid policy will continue, but in mollifying terms. The frustration and anger at zero-Covid cuts across all socio-economic classes, so it is difficult to fall back on the playbook of vilifying one group as troublemakers as politically motivated or portraying the protests as the work of hostile foreign interests.

That has not stopped the Central Political and Legal Affairs Commission wheeling out the well-practiced line that it was ‘necessary to crack down on infiltration and sabotage activities by hostile forces in accordance with the law’.

More notably to this Bystander, officials are stressing the need to step up vaccination of the elderly, the most vulnerable group to the latest outbreaks of infection. Only once vaccination rates are improved can an exit strategy from zero-Covid be contemplated.

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Covid-19 Protests Pose A Potential Tipping Point For China

THE POPULAR DISCONTENT with the restrictions on daily life caused by the zero-Covid strategy has been simmering for months. The way it is now boiling over into mass street protests across China involving clashes with authorities is unprecedented for a country where the forceful imposition of social stability is the norm.

In Shanghai, where there were minor acts of resistance during the two-month lockdown earlier this year, reports say thousands of protestors have taken to the streets over the weekend, with some overtly critical of the Party and its leader, Xi Jinping. Police were seen bundling away those inciting such sentiments.

Protestors also laid flowers in the city’s Urumqi Street in memory of the ten victims of a fire in a locked-down apartment building in the Xinjiang capital on November 24. That deadly event triggered confrontations between residents and authorities amid accusations that residents of the building had not been able to flee and firefighters prevented from arriving by the zero-Covid restrictions (both allegations denied, as would be expected in state media; however on Sunday, Beijing authorities announced a ban on barricading the entrance gates of buildings under lockdown).

Mass protest movements everywhere tend to have a trigger event, often something not so out of the ordinary but occurring at the right moment to kindle smouldering discontent. The Urumqi fire may prove to be that, although equally, the leadership will move rapidly to extinguish any movement that might challenge it.

Beyond the street scuffles from Guangzhou to Lasha and Zhengzhou, there are incipient signs of anti-regime protest in the white banners in Shanghai and white sheets of paper held by students protesting in Beijing and Nanjing, both anti-censorship symbols that were also used by pro-democracy protestors in Hong Kong. Unverified videos on social media also show students chanting in support of freedom and democracy.

The frustrations and exhaustion of coming up to three years of strict zero-Covid restrictions, quarantines and testing are difficult to imagine elsewhere, where living with the pandemic has become the standard public health policy response. Allowing some dissent to blow off steam is a necessary safety valve in China; regulating it will be the challenge for authorities.

Beijing is boxed in. Zero-Covid is a policy closely attached to Xi and one to which he has repeatedly re-committed. Politically, it cannot be jettisoned overnight.

China’s low vaccination rates among the elderly, especially those over 80, plateauing booster rates and relatively ineffective vaccines compared to the Western mRNA shots that China refused to import make the health risks of lifting the policy unacceptably high. Hospitals would likely be swamped and a wave of mortality would undermine the Party’s narrative of its care for the people in contrast to the hundreds of thousands of deaths accepted by Western governments in their rush to open up for economic reasons.

Efforts to administer the zero-Covid policy more flexibly, including targetted rather than citywide lockdowns and less stringent quarantine rules, have been stymied by the repeated surges of infection caused by the omicron variant of the virus. Finding euphemisms for ‘lockdown’ has become a cottage industry among officials as large city after large city experiences new outbreaks requiring suppression.

The virus has adapted but China’s response to it has not.

Last week, China recorded its highest number of daily Covid cases since the pandemic began, 31,527 cases, a relatively tiny number for a country of 1.4 billion people and having an official Covid death toll of 5,200. That is three deaths per million of the population, compared with a rate a thousand times that in the United States.

China’s zero-Covid policy has saved lives, albeit at a high cost to economic activity. That cost is becoming potentially higher with reports that the giant electronics contract manufacturer, Foxconn, plans to shift half of Apple’s iPhone production from China to India in what would be Covid’s first major impact event on a global value chain.

Hitherto, the leadership has been prepared to accept the economic costs for political reasons. The question now is, how high a price in social stability on top of that will it be prepared to tolerate before the inevitable crackdown occurs.

Update: Protests in Shanghai and Beijing continued for a second night on Sunday.

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China Is Stuck With Zero-Covid Policy For Now Regardless of Protests

AFTER ALMOST THREE years of lockdowns and mandatory testing and quarantines to prevent the spread of Covid-19, urban Chinese are getting antsy.

The authorities have announced some easing of the zero-Covid strategy. However, a long list of changes amounts to little more than shortening the mandatory quarantine period for inbound travellers and scrapping a system where airlines are penalized for carrying infected passengers.

Only the reduction in the strictness of quarantines triggered by second-order contacts touches daily life. None of that deals with the food shortages, price gouging and difficulty getting medical treatment when residents are confined to their homes, whether that is called a lockdown or voluntary static management.

Many of the changes direct local authorities to cope with local outbreaks rapidly and effectively without resorting to lengthy citywide shutdowns, as happened in Shanghai earlier this year.

To officials, the changes may seem substantial, and the initial steps along the path to ending zero-Covid that will be long, and needs to go through more extensive vaccination of the elderly, whose vaccination rates are still too low to allow living with Covid in the way that other countries have decided to do

The discontent that bubbled over into the streets of Guangzhou is only the latest example of how this discontent is starting to manifest. As with the recent protests in Lhasa, this one appears to have involved many migrant workers. For that group, a lockdown cuts off the ability to work and a livelihood that is already precarious.

With Covid workers being attacked and barriers pulled down, it could as readily be called a riot as a protest. Such social instability will worry senior leadership as it knows it has to stick with zero Covid for now, regardless of the cost.

Economic costs can be swallowed, however reluctantly, but social instability is altogether more undigestible. Arrests as a result of lockdown protests are starting to tick up.

The 17,000 new Covid infections that China reported on Monday were the highest daily total since late April. The outbreak in Guangzhou accounts for most of them, but there have been surges in Beijing and Chongqing.

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Covid Outbreaks Across China Stress Zero-Covid Policy

GUANGZHOU IS STRUGGLING to avoid being the next Shanghai in the sense of being forced into a citywide lockdown to curb a flare-up in Covid-19 cases.

The city reported 2,377 new locally transmitted infections on November 7, up from 1,971 the previous day. Two weeks ago, day-on-day increases were in the double digits.

Guangzhou’s cases account for one-third of new locally transmitted infections across the country. According to China’s health authority, there were 7,475 reported cases nationally on November 7, up from 5,496 the day before. That is the highest daily total since May 1.

Many districts in Guangzhou have imposed curbs of varying severity as city authorities undertake the Sisyphean task of enforcing the zero-Covid policy to be as undisruptive as possible. So far, central Haizhu is the only district in total lockdown.

Elsewhere in the city, some compounds and neighbourhoods have been sealed off with restricted food and other courier deliveries, public transport services have been suspended, entertainment venues and restaurants closed and daily testing introduced.

The Guangzhou outbreak is particularly threatening economically as the city and its surrounding region is a major manufacturing hub. The rest of the world will feel the knock-on effects via supply-chain disruptions.

Further north, Zhengzhou, the capital of central Henan province and home of the giant Foxconn electronics factory, is under some lockdowns, while in Beijing, which has seen a minor flare-up in new cases, selective lockdowns are being imposed.

The outbreak in Hohhot in Inner Mongolia remains the second most serious after Guangzhou’s, with 1,760 new local cases reported for November 7, up from 1,013 a day earlier. Hohhot has been locked down since early last month.

However, the dispersion of new cases across the country indicates the strain the zero-Covid policy is under, regardless of the ‘unswerving‘ official commitment to it.

Incidences of public pushback are increasing, with a street clash between residents and health workers on Monday in Shangdong province leading to seven arrests, according to police.

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China’s Zero-Covid Policy Is Here To Stay For Now

HOPES THAT CHINA’S zero-Covid policy is about to be lifted remain just that, hopes. China will continue to adhere to the policy — ‘unswervingly’ was the word used by health officials at a briefing today.

Hu Xiang, from the National Health Commission’s disease prevention and control bureau, said:

Previous practices have proved that our prevention and control plans and a series of strategic measures are completely correct…The policies are also the most economical and effective.

The second sentence strikes this Bystander as the more salient. The economic cost of putting cities and factories under prolonged lockdowns had been advanced as the reason that Xi Jinping would ease the stringent restrictions he has imposed since the get-go to control the pandemic.

That may have temporarily boosted the share prices of Chinese equities, much in need of a lift, but ignored that politics and Party survival trump economics in Xi’s China, and the continuing under-vaccination of the population and the relative inefficiency of the vaccine that has been given.

Beijing has made much of how few of its citizens have died from Covid-19 (less than 29,000 deaths is the official number) compared to the rest of the world (more than 1 million in the United States, for example). It has paraded such numbers as a sign of the Party’s care for the people and the superiority of China’s governance over other systems. It will not readily give up that narrative.

China has administered 3.5 billion doses of vaccine. However, swathes of vulnerable elderly remain un- or under-vaccinated, and millions of all ages are at risk from the new variants against which indigenous vaccines are not particularly effective.

Lifting zero Covid would raise the likelihood of hundreds of thousands, perhaps millions of deaths, a politically unacceptable risk to the leadership. The fragility of public health services, especially in third-tier cities would also be exposed again.

A further concern is that lockdown fatigue among the public may turn into something more threatening than displays of angry frustration, which are widespread.

The approval for the German vaccine BioNTech to be given to ex-pats, announced after German Chancellor Olaf Sholz’s visit, may be a sign that Beijing’s resistance to foreign vaccines is waning and that large-scale imports that would provide widespread protection for the general population may be coming.

However, it would still likely not be until next spring at the earliest that vaccination levels would be at levels that would allow more leeway in keeping more of daily life going when new infection outbreaks are detected.

In the meantime, there will likely be small, cautious steps in the direction of more flexibility in zero-Covid implementation. It has already been announced that more international flights will be allowed, although that will have a de minimus impact on domestic lockdowns as quarantine restrictions will still apply.

Local authorities will also be pressed by Beijing not to be overzealous in their imposition of zero-Covid measures when local outbreaks occur. However, local officials know that in the Xi era, careers are not damaged by erring on the side of caution when it comes to implementing the leader’s flagship policies.

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Covid-19 Returns To Wuhan As China’s Lockdowns Drag On

LOCKDONWS HAVE RETURNED to Wuhan, where Covid-19 was first reported nearly three years ago.

Some 900,000 residents of the central Hanyang district were told on Wednesday to stay home at least until Sunday after 18 cases were detected. Social media posts show barriers being erected in the streets. All non-essential businesses have been instructed to close. Food stores and pharmacies remain open.

Wuhan had enjoyed a long run of being Covid-19 free after eliminating the virus by April 2020. However, in July, the Jiangxia district on the city’s outskirts was locked down after an outbreak was detected.

Reported cases are edging up again nationally and are the highest in two weeks. Thursday brought a third successive day of more than 1,000 reported new symptomatic and asymptomatic cases.

New lockdowns have also been imposed this week in Xi’an, Datong city in Shanxi province and a central district in Guangzhou.

According to Nomura, 28 Chinese cities were implementing varying degrees of lockdown measures as of October 24. These affected some 208 million people in regions responsible for nearly a quarter of China’s 2021 economic output.

At last week’s 20th Party Congress, Xi Jinping dismissed the possibility of any immediate easing of his zero-Covid policy, despite the economic cost and widespread popular weariness with the strict measures.

Meanwhile, video footage of what appear to be anti-Covid protests in Lhasa has emerged. The Tibetan capital has been under lockdown for nearly three months. The protestors seem to be several hundred immigrant Han Chinese workers rather than Tibetans.

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IMF Cuts Its China Growth Forecasts Sharply

Screenshot of cover of IMF' July 2022 update to its World Economic Outlook

THE INTERNATIONAL MONETARY FUND has sharply cut its forecast for China’s growth this year and next as part of a gloomy mid-year update to its World Economic Outlook.

The Fund is now expecting China’s economy to grow 3.3% this year and 4.6% next, which is 1.1 percentage points and half a percentage point lower, respectively, from its April forecast.

The IMF cites the lockdowns to contain Covid-19 and the deepening real estate crisis, causing a sharper-than-expected slow down in the first half of the year, as the reasons it lowered its forecast. It warns that both could worsen, further reducing growth, while geopolitical fragmentation could impede global trade and cooperation.

The slowdown has already added to global supply chain disruptions.

COVID-19 outbreaks and mobility restrictions as part of the authorities’ zero-COVID strategy have disrupted economic activity widely and severely. Shanghai, a major global supply chain hub, entered a strict lockdown in April 2022, forcing citywide economic activity to halt for about eight weeks. In the second quarter, real GDP contracted significantly by 2.6 percent on a sequential basis, driven by lower consumption—the sharpest decline since the first quarter of 2020, at the onset of the pandemic, when it declined by 10.3 percent. Since then, more contagious variants have driven a worrisome surge in COVID-19 cases. The worsening crisis in China’s property sector is also dragging down sales and real estate investment. The slowdown in China has global consequences: lockdowns added to global supply chain disruptions and the decline in domestic spending are reducing demand for goods and services from China’s trade partners.

Chart showing impact of Covid-19 outbreaks in China on global supply chains. Source: IMF July 2022 update to World Economic Outlook

Growth of 3.3% would be China’s slowest growth in four decades, excluding the initial COVID-19 crisis in 2020. The official target of above 5% growth seems increasingly out of reach regardless of the infrastructure spending stimulus being poured into the economy.

Higher energy and food prices because of the war in Ukraine are external headwinds beyond Beijing’s control, as is policy tightening by the major central banks to tame inflation. What is in Beijing’s remit, a recalibration of the zero Covid strategy to reduce growth trade-offs, will be minimal at most.

Downside risks include larger-scale outbreaks of more contagious virus variants that trigger further widespread lockdowns under the zero-COVID strategy. In addition, delayed price and balance sheet adjustments in the property sector could cause a sudden, wider crisis or a protracted adjustment with broader macro-financial spillovers. A sustained slowdown in China would have strong global spillovers, whose nature will depend on the balance of both supply and demand factors. For example, further tightening of supply bottlenecks could cause higher consumer goods prices worldwide, but lower demand might ease commodity pressures and intermediate goods inflation.

Overall, the IMF expects slower growth and trade and higher inflation globally. It now puts global growth at 3.2% this year and 2.9% next, although it acknowledges that the risks are ‘overwhelmingly tilted’ to the downside. Its ‘plausible alternative scenario’, in which risks materialize and global growth slows to 2.6% this year and 2.0% in 2023, looks as plausible as its baseline scenario.

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Vaccination Will Not Eradicate China’s Zero Covid Policy

Map showing biweekly confirmed COVID-19 deaths per million people, Jul 23,
2022; Source: Our World in Data

PRESIDENT XI JINPING is far from the first world leader to have a well-publicised exemplary vaccination against Covid-19.

Yet, the remarks by Zeng Yixin, deputy head of the National Health Commission, that the top leadership have all been vaccinated with domestically produced Covid vaccines is notable on several counts.

First, information connected to senior officials’ health is customarily tightly held.

Secondly, Xi’s doubling down on ‘zero-Covid’ is China’s signature response to the pandemic in contrast to most of the world’s acceptance of endemic Covid, trusting a vaccinated population will keep severe infection and mortalities at low rates. Attempting to eradicate Covid through the zero-Covid policy carries high costs, socially from the mass testing, strict quarantine rules and local lockdowns, and economically from the disruption to commerce and manufacturing lockdowns cause.

China’s Covid mortality rate is minuscule compared to other countries, but, until recently, so were its vaccination rates, especially among the vulnerable elderly. These are now officially up to 90% (share of the population that has been double jabbed). However, Sinovac, China’s inactivated-virus vaccine, does not reach the same level of effectiveness as the mRNA vaccines used in the West until three doses, which may explain the timing of Zeng’s announcement about Xi. China’s mRNA vaccine, ArCoV, is in trials.

However, it will reinforce speculation in the West that Beijing is preparing to drop its zero-Covid policy. That seems unlikely if only because Xi’s endorsement has made the policy a political imperative rather than an issue of public health.

The Party has also been using low Covid mortality and case rates as evidence that China’s political system is superior to liberal democracy, a key pillar of its argument for its legitimacy. It would take near-universal vaccination with an mRNA vaccine to reduce mortality and severe infection to sustain that narrative in place of zero Covid.

That is many, many months off. Cai Qi, the Beijing Party Secretary, recently said his city would uphold zero Covid for the next five years.

Arguing that vaccination levels and treatment capabilities have reached a level at which it was no longer necessary to eliminate the virus through zero Covid would also be challenging. The Party’s propagandists would need to find a uniquely Chinese spin on a policy widely adopted by other countries.

Minimising the economic damage of zero Covid is gaining policy attention, especially as headwinds increasingly batter the economy. Dynamic zero-Covid means eradicating new local outbreaks by removing infected cases to isolation centres. Lockdowns are becoming more targeted and quarantine periods shorter. The capital, for example, has managed to avoid the lengthy citywide lockdown that afflicted Shanghai from late March to early June.

However, zero-Covid will remain in place for at least the rest of this year, well into next, and, potentially, well beyond.

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Zero-Covid Weighs Heavily On China’s GDP Growth

CHINA’S ECONOMY JUST about eked out positive growth in the second quarter compared to a year earlier, but the contraction from the first quarter tells the story of the economic impact of the zero-Covid policy on businesses and consumers, especially the lengthy lockdown in Shanghai.

Gross domestic product grew by 0.4% in April-June year-on-year and contracted by 2.6% compared to January-March, the Bureau of National Statistics announced today.

Shanghai’s economy shrank 13.7% year-on-year in the second quarter and Beijing’s 2.9%.

The national year-on-year number was the smallest since the data series began in 1992, excluding the 6.9% contraction in the first quarter of 2020 due to the initial COVID shock.

The recent high-frequency indicators, particularly for retail sales, suggest that the economy is starting to bounce back.

However, outbreaks of the highly contagious Omicron variants forcing more full or partial lockdowns remain a downside risk to recovery, given the continuing commitment to the zero-Covid policy.

The beleaguered property development sector remains a drag on growth, and the worsening outlook for the global economy is a further headwind.

The official target of 5.5% growth for the full year continues to look beyond reach, with an unrealistic 10% growth needed in the second half to achieve it. Further stimulus measures are likely, although authorities are limited in what they can do that will not stoke inflation (subdued by world levels) or worsen long-term debt risks.

Bloomberg calculates that $1.1 trillion has been earmarked for infrastructure spending, suggesting at best an extended pause to the effort to deleverage the economy.

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Mini-Lockdowns Become China’s New Normal

Chart showing 7-day trailing average of confirmed new Covid-19 cases in China, June 1-July 10. Source: Our World in Data.

THE LATEST VARIANTS of Covid-19 are posing new challenges to China’s zero-Covid policy and raising concerns that another round of lockdowns is imminent.

According to authorities, Macau has closed its 30 casinos and other non-essential businesses for at least a week after recording more than 1,500 Covid cases since the middle of June. Some 19,000 people are in mandatory quarantine.

Several casinos have been converted into temporary medical facilities, as Macau has only one public hospital.

While not formally locked down citywide, Macau, in practice, is closed.

Meanwhile, Shanghai authorities announced on Sunday that the city had identified its first case of the Omicron BA.5.2.1 mutation and that residents in several Shanghai districts are undergoing three days of double rounds of Covid testing. Mass testing in multiple districts also took place last week.

Mass testing has become the first line of defence to keep infection levels in check, with a negative test required to travel on public transport or enter certain places and those testing positive being put into mandatory quarantine.

China’s first case of the highly contagious BA.5 variant was discovered in the city in mid-May. Authorities said it was brought into the country by a passenger on a flight from Uganda. It has since been detected as far away as Xian and Dalian in Liaoning province.

Shanghai only emerged from a punishing near two-month lockdown in early June. Central government officials have said that new curbs should be targeted to reduce economic damage, but there is no indication that the huge cost of closing Shanghai has changed Beijing’s commitment to its zero-Covid. strategy.

Elsewhere, mass testing is also being conducted in several districts in Guangzhou and Xining in Qinghai province. Nanchang in Jiangxi province closed places of entertainment on Saturday.

Temporary curbs, including shutting entertainment and cultural venues, have also been imposed in Danzhou and Haikou in Hainan province and Lanzhou in Gansu. In all, some 6 million people are affected.

The town of Qinyang in Henan almost wholly locked down its nearly 700,000 residents from Sunday. One person from each household is allowed out every two days to get groceries.

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