May 24, 2022

THIS IS THE QUESTION I’VE BEEN ASKING OVER AT THE PJMEDIA MOTHERSHIP FOR TWO MONTHS: Why is Xi Jinping doubling down on a ‘zero-Covid’ policy that is causing massive economic distress and public anger in China?

For an authoritarian regime that draws its legitimacy primarily from technocratic proficiency and ability to ensure economic growth and prosperity, cratering of the economy is bad enough, a depression in the job market is worse as it may create social unrest and pose political challenges for a regime obsessed with social stability. And it should be of particular concern for Xi ahead of the 20th Congress of the Chinese Communist Party where he is expected to secure an unprecedented third term in power.

Once again, unlike the 2020 experience when the lockdown measures in Wuhan benefitted the e-commerce industry, Xi’s ‘zero-Covid’ policy to tackle the notoriously contagious Omicron mutant has resulted in a decimation of both online and offline businesses in a “double killer” effect.

The situation is so grim that a former Chinese central bank advisor, Huang Yiping, an economics professor at Peking University, was quoted by Wall Street Journal as saying, “We’ve reached a point where we should use policies to save the economy at all costs.” A similar refrain can be heard from Wei Yao, chief economist at Societe Generale SA, who told Bloomberg that “if the surge in unemployment does not raise the urgency of adjusting the zero-Covid measures to allow the economy to normalize, we don’t know what will.”

The founder and chair of one of Asia’s biggest private equity investors, Weijian Shan, has said that China’s policies have caused a “deep economic crisis” and “Chinese economy at this moment is in the worst shape in the past 30 years.”

I wonder what the Biden Administration will come up with to try and help bail Beijing out.

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