(May 28, 2022 issue of The Economist magazine)
Shanghai’s commercial area, where the number of people has almost disappeared due to the lockdown (May 26, Photo: Archyde.com / Afro)
Inflexible politics is prioritized over practical interests.
China has been the largest and most reliable source of economic growth for the world economy for the last two decades.
During this period, it brought about a quarter of the world’s gross domestic product (GDP) growth, with positive growth in 79 of the 80 quarters.
Almost since opening the country after Mao Zedong’s death, the Chinese Communist Party has taken a pragmatic approach to enriching the country, combining market reforms with state management.
But now, the Chinese economy is in danger.
The urgent issue is the “Zero Corona” campaign. This policy can cause economic stagnation and drive a pattern of repeated suspensions and resumptions of economic activity.
This is aggravating the bigger problem. That is the ideological struggle of President Xi Jinping to reshape state capitalism.
Continuing the current route will slow China’s economic growth, reduce its predictability, and have a major impact on China and the world.
China’s economy wobbles ahead of the Communist Party Congress
The lockdown in Shanghai is being eased nearly two months after its introduction, but China is far from Zero Corona, and new outbreaks are occurring in Beijing and Tianjin.
More than 200 million people are living restricted lives and the economy is wobbling.
Retail sales in April fell 11% year-on-year, and purchases of Kentucky Fried Chicken (KFC), cars and Cartier jewelery were sluggish.
Although some workers stay in their factories to work, industrial production and export volumes are declining.
Full-year 2022 economic growth may not be significantly higher than that of the United States. If so, it will be the event since 1990, when economic sanctions were imposed for the massacre at Tiananmen Square.
It’s the worst timing for Mr. Xi. This is because Mr. Xi intends to get approval for the third consecutive throw at the 20th Chinese Communist Party Congress this fall, breaking the recent practice of being replaced in the second term and ten years.