China’s zero-Covid catastrophe threatens Xi’s dream of becoming a new emperor
"Soros, an avowed anti-communist since escaping Hungary in 1947, claimed to have seen through Xi’s dedication to his eradication of a disease that his country has been accused of creating - whether by negligence or design.
“He never told the Chinese people that they had been inoculated with a vaccine that was designed for the original Wuhan variant and offers very little protection against new variants,” said Soros.
“Xi can’t afford to come clean because he is at a very delicate moment in his career. His second term in office expires in the fall of 2022 and he wants to be appointed to an unprecedented third term, eventually making him ruler for life.
“Everything must be subordinated to this goal.”
Yet this very determination to cling on at all costs could be Xi’s undoing, he warned, as lockdowns devastate the economy and embarrass China on the world stage.
“Contrary to general expectations, Xi Jinping may not get his coveted third term because of the mistakes he has made,” he says.
“But even if he does, the Politburo may not give him a free hand to select the members of the next Politburo. That would greatly reduce his power and influence and make it less likely that he will become ruler for life.”
The next six months are crunch time. Xi is expected to be confirmed for a third five-year term at the 20th National Congress of the CCP in Beijing this November - the next step in his dream of becoming a new emperor.
He has already gone further than many of his predecessors to cement himself at the heart of Chinese politics. ‘Xi Jinping Thought’, derived from the leader’s writings and speeches, have been integrated into the CCP’s constitution for half a decade.
“This Party Congress gives Xi a chance to set himself a further stage up towards the Deng [Xiaoping, the Chinese revolutionary leader] and the Mao [Zedong] level,” says Rory Green, a China analyst at consultancy TS Lombard.
But he has not had the victory lap he might have hoped for. Since the 19th Congress in 2017 – an event which might have introduced Xi’s successor to the world, yet made clear no such person exists – he has had a dire run.
The horrors in Xinjiang and the fate of the Uyghur people came to the world’s full attention despite Beijing’s best efforts to hide and obfuscate its repression.
Separately, Covid ravaged first Wuhan and then the world. The fact Xi has not left China since the opening weeks of 2020 is a possible sign of how vulnerable he feels to domestic challenges.
Economically, he has hobbled China’s hitherto-unstoppable tech giants, which had seemed on their way to worldwide domination. Hong Kong’s position as a freewheeling financial centre has been trashed as the city is bent to the Communist Party’s will. And now the country is trapped in a nightmare cycle of lockdowns, undermining its industrial base, consumer economy and status as the starting point of the world’s supply chains...
Much of the Communist party’s perceived legitimacy, at least in the eyes of international observers, comes from its multi-decade success in taking the ruined economy under Mao and turning into a global giant. Today, that record looks shaky.
It might have covered up Covid’s spread at first, but once it acted, Beijing was widely thought to have done an effective, if brutal, job in 2020.
Output plunged early in the year, but it was the fastest big economy to recover thanks to rapidly stamping on outbreaks and stimulating growth vigorously.
Now, however, low vaccination rates, particularly among the vulnerable elderly, and a relatively poorly performing jab have left the country exposed, while the political insistence on zero tolerance has translated into repeated savage crackdowns.
While ordinary people are most exposed to the crushing policies, they do not have a say in Xi’s future. Covid rules just so happen to make it easier than ever to control citizens’ movements and prevent protests...
Many of those in the upper echelons of the Party owe their positions to Xi, and those who want to climb higher must follow his wishes.
Steve Tsang, professor at SOAS, says Xi’s almost 10 years at the top have given him time to control the system.
“He is in control of the military, the secret police, the regular police, the supplementary police, the Communist Party apparatus and the government,” he says. That includes replacing all of the generals whose loyalty may have been the least bit suspect.
“He is not a sloucher - he is a hands-on micromanager. The idea of someone within that being able to organise a plot against him without a real cataclysmic catastrophe in China is very unlikely.”
At the same time, Beijing’s zero Covid policy - successful or not - gives Xi more power over his underlings: “The dynamic zero Covid policy as conceived by Xi Jinping is by definition the most amazing, fantastic, correct policy ever, and problems only happened because of people who were implementing them not doing it right,” says Prof Tsang, explaining the Party mindset and the intensity of the leader’s hold over the country’s state-controlled media...
“If you don't have a stable social environment, there will definitely be some political implications,” says Raymond Yeung, Greater China chief economist at Australian bank ANZ.
Those economic struggles are significant, and mark a sudden change to the country’s progress. For decades an engine of the global economy, China now poses a drag on the rest of the world because of his policies...
Goldman Sachs called China’s economy in April “exceedingly weak” with plunging housing construction and sales, stumbling lending and an almost 50pc drop in car production all indicating that GDP was flung into reverse in the second quarter by the latest lockdowns.
The investment bank expects that, even if Covid is now under control and Government stimulus plans work well, the economy will only grow by 4pc this year - well below Beijing’s 5.5pc target. After 2020, that would be the worst performance since 1990.
Analysts at Pantheon Macroeconomics expect the true rate of growth, as opposed to that reported via the opaque statistics of China’s state, to be in the region of 1.6pc this year.
The one-party state’s efforts to clamber out of this economic hole tend to rely on more spending, ordering banks to lend more and directing regional governments to spend heavily on infrastructure.
Economist Iris Pang at ING is sceptical this will work, leaving the economy struggling to get back to its pre-omicron size...
The labour market is another potential source of pain. Unemployment across the country’s 31 largest cities rose to 6.7pc in April, up from 6pc in March, as lockdowns rippled through the economy and slowed activity – taking joblessness to the highest level since early 2020.
Joblessness among those aged 16 to 24 rose to 18.2pc, the highest figure ever recorded according to official figures. Xi’s recent crackdowns on tech and real estate – two key engines of growth for the Chinese economy – have led to sharp decreases in job openings across both sectors. Many young Chinese people work in e-commerce, which is booming globally but has drawn recent disapproval from Beijing...
“This is the group of people that should be supportive to mortgage or housing demand [in the future],” says ANZ’s Yeung. “If they don't get enough for the downpayment on a future mortgage, there will be macro implications for the economy.”
With nearly 11m graduates poised to enter the jobs market this year, the pressure could soon grow more intense, tipping youth unemployment to 20pc or higher. There is a danger of further waves down the line: as the pandemic raged, the government pushed students to continue their studies rather than enter the world of work...
China’s economic rise, and the financial and political clout it brought, was based on being both cheap and reliable.
Anyone who wanted anything manufactured could go to China and find what they needed, the source of any supply chain.
Now it is neither. Costs were already rising in the years before Covid as the country ran short on the ultra-cheap labour which fuelled its boom, and the government sought to move away from a reliance solely on low-cost production.
And reliability has gone out of the window with the Middle Kingdom now more likely to be associated with chaotic and disrupted supply chains than the hyper-efficient deliveries required for modern “just in time” manufacturing.
Customers live with the threat of an instant and insurmountable lockdown being imposed on the factories making goods for them, and risk months of expensive delays as container ships are stuck outside ports or lorries sent on lengthy alternative routes to avoid Covid hotspots.
Apple was perhaps the greatest advertisement for China’s model of globalisation, earning its place as the world’s most valuable company on the back of Chinese manufacture of its California-designed gadgets.
Yet even the iPhone giant is reported to be looking at moving parts of its operation out of the country. In April, Apple said Covid disruptions and supply chain problems will cost it as much as $8bn of revenues this quarter...
It is not that he is without rivals. There are other power bases built around processes of allegiance and patronage, particularly the ‘Shanghai clique’ of Jiang Zemin, a former general secretary of the Communist Party. Some pundits have suggested Xi may face a challenge from premier Li Keqiang, who has been outspoken on China’s economic challenges.
But Xi’s powerbase is immense: he has the loyalty of the military and controls the media and state security apparatus. Li has no such muscle behind him, and 95-year-old Jiang’s empire has eroded under Xi’s leadership.
“There’s no important force or individual leader at the top level of Chinese politics that is powerful enough to challenge Xi Jinping,” says Cheng Li, director of the John L. Thornton China Center at Brookings, the Washington, DC-based think tank.
“Now of course the dynamic may change… but not now. Maybe five or 10 years down the road.”
Prof Tsang judges it unlikely enough rivals can unite to stand in Xi’s way, given his willingness to use repression as a tool of his personal politics at times when he cannot get what he wants through popularity.
“People misunderstand the Communist Party in thinking it will do it [repression] to its opponents - actually, the Party historically has always been harsher to people within the Communist Party who disagree with the leadership. Those are called 'traitors',” he says.
It means the other 24 members of the Politburo beyond Xi, and the six fellow members of its standing committee, are unlikely to put their heads above the parapet.
“Unless they could actually almost unite, it would be very very difficult to take Xi Jinping down. If you do not have a clear, absolute majority and you try to do something and you fail, imagine what may happen to you and your family?” says Tsang."
