The Chinese Communist Party (CCP) is launching desperate measures to “stabilise” the faltering Chinese economy as President Xi Jinping is adamant about not diluting his Zero Covid policy even at the risk of alienating more people. What impact the mauled economy has on the 20th Party Congress where Xi wants to get his third term is anybody’s guess.
In an unusual incident that shows how rattled the government is with the flailing economy, Premier Li Keqiang presided over a State Council Executive Meeting recently. It is said the executive may have decided on the measures much earlier but decided to announce the results only now.
The measures finalised by the State Council prove without doubt what the media calls “the economic dislocation from Beijing’s Zero-COVID policy, bruised investor and consumer confidence, and geopolitical complications”.
Here are the measures, listed in an exclusive note released by the state media: Extending value-added tax credit refunds to more industries; prolonging the policy of deferred pension premium payments for hard-hit sectors and certain categories of enterprises; doubling the scale of the support facility for loans to micro and small businesses; encouraging the listing of platform companies on domestic and overseas markets; relaxing the restrictions on vehicle purchasing.
The government proposes to urgently launch a new round of rural road construction and renovation work – aimed at giving jobs to the unemployed – and building a batch of hydropower and coal-fired power plants this year.
However, these measures will amount to nothing unless the big elephant in the room – the Zero Covid policy – is taken care of. No body or organisation in China has the power to deal with it, other than President Xi.
The Council meeting follows an urgent meeting of the Politburo of the CCP Central Committee presided over by party General Secretary Xi Jinping. The meeting was forced to admit the growing “complexity, severity, and uncertainty” facing China’s economic development “due to Covid” and the Ukraine crisis. The Politburo recommended extensive macro and monetary policy to stabilise the economy including relief packages for sectors affected by Covid and tax rebates and tax cuts.
The CCP leadership is only now reluctantly coming to terms with the plummeting “China’s export and retail sales figures amid draconian Covid measures and lockdowns”.
However, the Politburo could not challenge the Zero Covid Policy in the presence of President Xi. In what is evidence of Xi’s total control over the Politburo, the latter actually “insisted” on the need to “persist in the dynamic zero policy” while “minimis[ing] the epidemic’s impact on socio-economic development”. The Politburo sought to gloss over the fact that it was having to discuss how to handle the economic disruption caused by the very same Covid policy.
As the CCP leadership desperately tries to strike a balance between defending the Covid Policy and restoring the damaged economy, there appears no likelihood that China will formally abandon its Covid Policy. Some relaxations in the strict and seemingly indefinite lockdowns have been announced but they are merely skin-deep measures.
Any shift from the severe Covid measures will be done silently and gradually because the CCP cannot revoke its own policy. That is why, it has remained stoically silent as public anger is growing against the government in recent months. It perhaps thinks not reacting to the anger is the best way to tide over it.
For the record, the Politburo stressed that the “epidemic must be kept under control, the economy must be stabilised, and development must be safe”. It adopted measures that reflect the CCP’s dichotomy over the situation. For example, it wants to “persist in the dynamic zero policy” while “adhering unwaveringly to the principle of putting the people first and putting lives first”.
It defended the Zero Policy on the ground that it wants to “protect the people’s health to the maximum extent possible” and at the same time “persist with preventing foreign importation (sic) and domestic resurgence of the Covid virus”.
Without explaining how the government plans to kick-start the economy when the industries are shut, ports are closed, and people cannot stir out of their homes, the Politburo wants to “make every effort to expand domestic demand, realise the key role of effective investment, strengthen safeguards such as on land use, energy use and environmental impact assessment, and strengthen basic infrastructure construction across the board; bring into play the driving role of consumption in economic cycles”.
Turning a deaf ear to the plight of the people and the workers, the Politburo wants to “accelerate the construction of a new development paradigm”, “use reforms as a method to solve problems in development” and “persist
in expanding a high level of openness to the outside world, actively respond to the appeals of foreign-funded enterprises doing business in China, including on the ease of doing business, and stabilise the fundamentals of foreign trade and investment”.
There is, however, no indication that the CCP and President Xi realise the gradual distancing between the people’s demands and the leadership’s goals. What role the growing disappointment of the locked down Chinese people will have on the outcome of the 20th Party Congress is still to be seen.