BEIJING – China’s economy is expected to slow ahead of the ruling Communist Party’s two-decade congress in the fall of 2022, as President Xi Jinping’s sweeping “COVID zero” policy and socialist ambitions are expected to stifle private spending in the country.
Even after the end of the Beijing Winter Olympics, which are scheduled to begin on February 4, the Communist Party-led government is likely to continue to implement strong anti-epidemic measures, including the lockdown of major cities and the suspension of all public transport services.
To succeed in the economic sphere and secure a controversial third term as party leader in congress, Xi would also promote “common prosperity”, aimed at narrowing income gaps in the country, by imposing more regulations on the country’s lucrative sectors. .
Consumption in China has been “tepid” as people’s movements have only recovered to half the level before the coronavirus outbreak began nearly two years ago, said Kokichiro Mio, senior researcher at the NLI Research Institute in Tokyo.
According to an academic familiar with Chinese government thinking, “the Communist Party’s zero COVID policy will certainly remain in place most of 2022, given President Xi’s insistence on successfully ending the congress after the Beijing Olympics. “.
“For at least another year, Chinese citizens and businesses would be frustrated by the harsh restrictions imposed by the authorities and lose their motivation to increase spending and investment. This would put strong downward pressure on the economy,” added the researcher on condition of anonymity.
The world’s second-largest economy grew 8.1% in 2021 from a year earlier as domestic demand recovered from the coronavirus shock, marking the strongest expansion in 10 years, government data showed on Monday.
The economy, however, grew by just 4% in the October-December 2021 period alone, as the outlook darkened amid growing fears of another wave of infections, detected for the first time. in the Chinese city of Wuhan at the end of 2019.
In Xi’an, more than 2,000 people have been infected with the virus for about a month since early December, prompting municipal authorities to lock down the central city of 13 million since the middle of the month.
Tianjin, known as a key gateway to Beijing, has also carried out COVID-19 nucleic acid tests targeting all of its 14 million people since the start of the month after community infections were identified. by the highly contagious omicron variant.
Beijing has not been spared either, with the city government saying on Saturday it had detected its first case of omicron.
In Shanghai, China’s largest shopping mall, some restaurants and shops have been closed since infections were confirmed there.
“We are not in a situation where we can just pretend nothing has happened,” said Hiroyuki Tanaka, a 36-year-old Japanese employee in the city. “What we have to do is stay in Shanghai and stay at home.
“Many Chinese have refrained from going out and tightened their wallets as they feel anxious about the future,” he said. “Under such circumstances, it is very difficult for the Chinese economy to maintain its growth momentum.”
In January, the World Bank said in a report that it had lowered its forecast for China’s economic expansion in 2022 to 5.1% from 5.4% amid the pandemic.
“I think the pace of China’s economic growth would be much slower than the World Bank estimates,” Tanaka said. “I don’t know what can boost China’s economy this year unless the coronavirus crisis recedes.”
Xi’s efforts to achieve common prosperity have also raised concerns that the most populous country will become a less attractive market, as the goal could place a heavy burden on the wealthy so the government can coercively rectify economic inequalities. .
Drastic policy changes aimed at emphasizing income distribution could “hinder technological progress based on the free ideas of the private sector,” said Kenta Maruyama, an economist at Mitsubishi UFJ Research and Consulting Co. in Tokyo.
Indeed, the Communist Party has tightened surveillance of the country’s IT giants to curb their monopolistic behavior and disorderly expansion of capital, raising concerns that the innovation of China’s high-tech industry could be hampered.
Large Chinese companies and business leaders would also be forced by central authorities to take measures that could help reduce income disparities, such as donating and providing social support.
“If the government uses common prosperity as a means of power struggle and moves forward in an unpredictable way, it could severely hamper the Chinese economy. Common prosperity is a double-edged sword,” Maruyama said.
Some observers, meanwhile, have said that a possible escalation of tensions between China and Taiwan would make foreign companies – especially those from democratic countries – reluctant to invest in the mainland, which would deal a serious blow to the economy. broadly this year.
Speculation is rife that Xi’s leadership may take military action against democratic Taiwan to unify the self-governing island with the mainland, ahead of the party congress where he would try to lay the groundwork to retain power. for life.
But Jeff Kingston, director of Asian studies at Temple University Japan, threw cold water on such a possibility.
“There is little chance of an invasion of Taiwan as it is a high risk option which could backfire on Xi,” he said.
China and Taiwan have been governed separately since their separation in 1949 following a civil war. Their relationship has soured since pro-independence President Tsai Ing-wen became the island’s leader in 2016.
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