Protests leave China facing a terrible trilemma

People gather for a vigil and hold white sheets of paper in protest over coronavirus disease (COVID-19) restrictions, during a commemoration of the victims of a fire in Urumqi, as outbreaks of COVID-19 continue, in Beijing, China, November 27, 2022. REUTERS/Thomas Peter - RC2KUX9TWWIF

HONG KONG, Nov 28 (Reuters Breakingviews) - Chinese officials’ muddled response to spiking Covid cases has set off three consecutive days of demonstrations spanning cities and social classes. The government, having wasted two years prematurely congratulating itself for fending off the pandemic, is now unprepared to address the interrelated economic, health, and political crises resulting from its overconfidence.

The protests could prove the most critical test of President Xi Jinping’s rule. Although hard to measure, so far the crowds appear to be smaller in size than in 1989, when the government used tanks to crush a mass protest movement of disaffected college students and factory workers angered by official corruption, stagnant wages and 18% inflation. Some are shouting for Xi’s dismissal.

Or they may just be less concentrated. The unrest is broadly spread around the country with people pouring onto the streets in frustration at tough epidemic controls that are depressing lives and businesses with no end in sight.

As in 1989, the issues are economic and political, and national in scope; once again middle-class students and blue-collar labourers like those on assembly lines at Apple (AAPL.O) supplier Foxconn (2317.TW) have found common cause. And the internet is facilitating protesters’ coordination, precisely what internal security services have spent decades trying to prevent.

The instability will accelerate the reversal of nascent investor optimism. Traders had poured back into beat-up shares in Chinese companies in early November after Beijing finally signalled it would start selectively easing Xi’s trademark “dynamic zero-Covid” approach. That was ill-timed. As the Hang Seng China Enterprises index rocketed up 27% in 11 trading days, new contagious variants of the virus were metastasizing; new cases exploded to over 40,000 on Sunday.

Cities reversed out of relaxation into intensified lockdown. However, because many elderly have declined vaccination, letting the disease rip would almost certainly cause a spike in deaths. Officials are also aware that for every citizen on the street griping about lockdowns, there is another who is terrified of catching Covid-19. When the city of Shijiazhuang tried to ease epidemic controls, for example, many residents cowered inside their flats instead of going shopping.

Such behaviour undermines arguments that abandoning Xi’s zero-Covid policy will instantly stimulate economic activity. The risk of high death rates and the still-rickety state of public healthcare systems in poorer regions make it tricky for the government to concede. A mix of carrots and sticks might clear demonstrators from the streets, but officials can neither intimidate nor placate the virus.

The bigger this wave of discontent gets, the more hard-liners may argue for a violent attack on dissent and a return to rigid quarantine. That carries its own risks. Some Beijing apologists argue that the Tiananmen crackdown enabled the subsequent era of wealth creation. Yet China’s economic growth slowed by nearly two-thirds in 1989 to 4% and stayed there the next year. In 2022, with real estate crashing, retail spending tepid, and exports down, the government can ill-afford further contraction. Even before factoring in Beijing’s response to the unrest, the International Monetary Fund expects a measly 3.2% GDP growth for China this year. But having patted themselves on the back into this corner, officials deserve little sympathy as they struggle to get out of it.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to add dropped word “Chinese” in paragraph one.)

CONTEXT NEWS

Protests over China's stringent Covid restrictions flared for a third day on Nov. 27, and spread to other cities in the wake of a deadly building fire which some demonstrators claimed was aggravated by quarantine measures that trapped residents inside the building. Local authorities denied the allegation.

Covid-19 cases began spiking in China in early November following a week-long public holiday. The government reported 40,347 new infections for Nov. 27 in an update issued Nov. 28.

Beijing announced 20 relaxations of the country’s pandemic policy on Nov. 11, including shorter quarantine periods and more narrowly targeted lockdowns.

Editing by Una Galani and Katrina Hamlin

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Asia Economics Editor Pete Sweeney joined Reuters Breakingviews in Hong Kong in September 2016. Previously he served as Reuters' chief correspondent for China Economy and Markets, running teams in Shanghai and Beijing; before that he was editor of China Economic Review, a monthly magazine focused on providing news and analysis on the mainland economy. Sweeney came to China as a Fulbright scholar in 2008, and in that role conducted research on the Chinese aviation industry and outbound M&A. In prior incarnations he helped resettle refugees in Atlanta, covered the European Union out of Brussels, and took a poorly timed swing at craft-beer entrepreneurship in Quito even as the Ecuadorean currency collapsed (not his fault). He speaks Mandarin Chinese, at the expense of his Spanish.