If Xi Jinping were a democratic leader, he would be in dire political trouble. The past few months have exposed the main weaknesses of Mr. Xi’s management of China’s economy just as he intends to consolidate his political control. What follows is a moral tale about the dangers of being an autocrat in a confused era.
The Chinese economy is at its lowest in a generation. Beijing will fall short of its target of 5.5% gross domestic product growth this year, and even when it announced that target was a grudging concession to economic heaviness. Despite some new bright spots, such as slightly improved business sentiment, most economic signs are negative.
Beijing’s “Dynamic Zero-Covid” strategy is a culprit. More than two years into the global coronavirus pandemic, Beijing’s only strategy to combat the virus remains total suppression. The result has been that major trade hubs like Shanghai have been thrown into draconian lockdowns for months while other regions have been threatened. The risk of future lockdowns has hampered business activity and investment as Beijing cannot say when the Chinese economy can finally reopen once and for all.
And note that dynamic zero Covid is shorthand for a string of failures: Mr Xi prematurely claimed victory for his lockdown policy a year ago, and now the autocratic government’s perverse internal logic makes it impossible for him to turn around . China’s healthcare system would be woefully inadequate to deal with a widespread outbreak. Vaccine nationalism and a poorly understood collapse in social trust have led to worryingly low vaccination rates among the elderly in China, while those who are vaccinated rely on vaccines that don’t work as well.
Dynamic zero Covid could – could – have been a survivable disaster for China, apart from anything else. Mr. Xi has attempted to consolidate political control of the economy by suppressing the productive private sector. Mr. Xi’s one-party (and increasingly one-man) rule cannot tolerate the emergence of flamboyant and popular rivals – which particularly threaten to become China’s charismatic tech leaders.
A specific subset of this economic problem concerns the real estate market. Mr. Xi is in the midst of a major restructuring of China’s overheated real estate industry. Beijing had no choice but to drain a market bloated by more than a decade of credit-driven economic stimulus. But the economic and political consequences of this property revolution have proved difficult to control. An early struggle was to reassure would-be homeowners their down payments were safe and small suppliers their bills would be paid before social unrest could develop. Beijing dodged that bullet only to face the prospect of a massive financial crisis among all provincial and local governments that depend on booming real estate prices for their revenues.
And so back to Mr. Xi. His main political project this year is re-election as China’s leader for a precedent-breaking third five-year term in October. He is almost certain to reach his goal. Which will exacerbate China’s economic woes, and not just because Mr. Xi is the author of so many of them.
China’s converging economic disasters are emerging from a series of bad policy compromises and gambles. The obvious solution is to change course, and even Mr. Xi seems to recognize this to some degree: look at recent efforts to persuade the private tech industry to boom again, or a series of belated policy endorsements for Private companies, such as tax breaks. The problem is that nobody believes Mr. Xi. A market is not something you can turn on or off at will. It’s partly a confidence exercise, as political leaders have to convince everyone in business that a change in policy is here to stay.
Losing an election would help.
It’s a pattern well known in the democratic world. Not only does an election bring new leaders with new ideas, but the fact that there is an electoral mandate for these policies gives households, businesses and investors the assurance that times are really changing. Even if the big cheese stays in office — as President Biden will do if the Democrats are berated in November — an election defeat offers a plausible cover for policy change, as President Clinton noted after 1994.
China’s major economic weakness is the lack of a political mechanism to bless or forgive political change. For many years, a silly media commentary claimed that the West should aspire to be “China for a day” in order to emulate an autocrat’s ability to get things done. Mr. Xi and his Communist Party will never admit it, but they would be much better off now if they could “be America for a day” and allow an election to vent public frustration with their rule — and theirs at the same time To lend credibility they have to change course.
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https://www.wsj.com/articles/china-tires-of-being-china-for-a-day-xi-jinping-economy-lockdowns-beijing-supression-autocrat-11654184447 China Tires of ‘Being China for a Day’