China Sending Mixed Message on Ending “Zero Covid” Policy

China Sending Mixed Message on Ending “Zero Covid” Policy

Some reports suggest that Chinese leaders are gradually rescinding the “Zero Covid” policies.

Chinese officials have grown concerned about the costs of their zero-tolerance approach to smothering Covid-19 outbreaks, which has resulted in lockdowns of cities and whole provinces, crushing business activity and confining hundreds of millions of people at home for weeks and sometimes months on end. But they are weighing those against the potential costs of reopening for public health and support for the Communist Party.

As a result, they are proceeding cautiously despite the deepening impact of the Covid-19 policies, the people said, pointing to a long path to anything approaching prepandemic levels of activity, with the timeline stretching to sometime near the end of next year.

The uncertainty around China’s Covid-19 strategy has led to a guessing game in the financial markets, with some looking for any sign that China would begin easing its Covid-19 policies. China’s Communist Party congress last month, when Chinese leader Xi Jinping claimed a third term, had once been viewed as a potential turning point in its battle against Covid-19, but little has changed in the country’s approach to containing the virus.

Still, other reports indicate China is doubling down on its “zero-COVID” policy despite increasing coronavirus infections and growing economic and social costs.

Chinese officials on Saturday said the country will continue to “unswervingly” follow the policy despite speculation that it would ease restrictions.

“Practice has proved that our pandemic prevention and control policy and a series of strategic measures are completely correct, and the most economical and effective,” said Hu Xiang, a disease control official.

Chinese officials often point to high COVID-19 death tolls in other countries like the United States when defending the restrictions. The U.S. reports more than 1 million deaths from the coronavirus while China reports more than 5,000, though the official death toll has been questioned by experts.

The Chinese business elite might have a few regrets about how much power President Xi has been allowed to grab under covid rules.

For decades, China’s business class had an unspoken contract with the Communist Party: Let us make money and we’ll turn a blind eye to how you use your power.

Like most Chinese people, they bought into the party’s argument that its one-party rule provides more efficient governance.

Now, the tacit agreement that entrepreneurs had come to count on is dissolving in front of their eyes. China’s leader, Xi Jinping, used an important Communist Party congress last month to establish near-absolute power and make it clear that security will trump the economy as the nation’s priority.

“My last lingering hope was dashed,” said the founder of an asset management firm in the southern city of Shenzhen who contacted me hours after the congress ended.

China’s “Covid Zero” is not likely to end until it suits Xi, as there will never be an end to covid (thanks to the likely lab leak scenario involving the Wuhan Institute of Virology). How much of its business remains when it ends is another question entirely.

China’s decision to maintain Covid controls is pushing companies to look to factories outside the country, according to The Economist Intelligence Unit.

“What we are hearing from companies [is] they are moving ahead with their supply chain diversification plans because this start-stop economy is here to stay,” said Nick Marro, global trade leader at The Economist Intelligence Unit.

“If it’s an on-off economy, if things can’t get done, that impacts decision-making,” he said. “We don’t expect companies to leave China. We just expect them to diversify their footprint, China plus one.”

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