All about COVID-19

Analysis | For China’s Xi, the coronavirus challenge comes laden with economic costs and political risks

Under lockdown: An aerial view of deserted roads and bridges in Wuhan, the epicentre of the coronavirus outbreak in China.   | Photo Credit: Getty Images

During a visit last September to the Central Party School, an elite institution in west Beijing that trains China’s future leaders, President Xi Jinping held forth on the major risks facing his country.

The slowing economy and the trade war with America would have been top of his mind as he warned of “complicated struggles” facing the country. Mr. Xi specifically mentioned the economy, China’s diplomatic environment, Hong Kong amid the unprecedented protests there, and Taiwan, where the prospect of reunification seemed slimmer than ever, as major risks.

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Mr. Xi was speaking on the eve of what the Communist Party of China (CPC) was billing as the first of four key anniversaries. In October, China would mark 70 years of the People’s Republic with a grand military parade. This year will mark the end of absolute poverty in China, a remarkable economic feat. In 2021, the CPC turns 100, while the following year, the 20th Party Congress will mark 10 years of Mr. Xi’s rule — for China, landmarks on what Mr. Xi like to call the country’s “road to rejuvenation” and achieving the “Chinese Dream”.

But just four months on after his speech, little would Mr. Xi have imagined that the biggest test of his 8-year rule would come not from far-away America but from Wuhan, a beautiful town of lakes and parks that is famous in Chinese history for launching the uprising that would bring down China’s last imperial dynasty.

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As China grapples with the fallout of the novel coronavirus outbreak, which as of February 5 has killed more than 490 people and infected more than 24,000, Mr. Xi and the CPC are already counting the costs, both economic and political.

The 11 million people of Wuhan and more than 40 million others in Hubei Province have been in lockdown, after Mr. Xi ordered the unprecedented quarantining of an entire city on January 23.

On February 3, Mr. Xi admitted that the outbreak was “a major test of China’s system and capacity for governance”, as he chaired a special meeting of the party’s top Politburo Standing Committee (PBSC). This followed the extraordinary January 25 meeting of the PBSC, proceedings of which were televised for the first time ever, as the leadership scrambled to respond to growing public anger and to make up for days of inaction by the Hubei Provincial government that allowed the virus to spread for close to one month before they realised the severity of the situation.

Mr. Xi outlined a two-fold agenda: controlling the epidemic, which he warned “directly affects” economic and social stability, and “safeguarding economic and social order”.

That is going to be easier said than done. The country has come to a standstill because of the extraordinary measures deployed to contain the outbreak. Factories are shut down. Many workers who were due to return this week after the Lunar New Year holiday remained confined to their villages and towns that are in effective lock-down, even in far away Provinces. Those that manage to leave home and return to work are being confined on arrival for 14 days.

Consumer spending is on pause. Apple and Starbucks are among the many outlets that have shut shop in the mainland. Cities as far away as Hangzhou, home to e-commerce giant Alibaba is based, are in complete lockdown.

The economic costs will be enormous. The timing, during the New Year holiday, couldn’t have been worse, with the outbreak costing the economy more than 500 billion Yuan ($72 billion), according to economists who estimate this year’s spending won’t even match half of what the 2019 holiday saw. The holiday is a key period for industries ranging from tourism to films. Last year, box office sales during the holiday accounted for 10% of the annual total.

The costs will far exceed what the 2003 SARS outbreak cost China, reportedly knocking off one percentage point of GDP growth to the then $2 trillion economy. China grew 10.1% in 2004, up from 10% the previous year, before rebounding to 11.4% growth in 2005. In 2020, growth could fall to 5.6%, down from 6.1% last year, estimates Oxford Economics, the lowest since 1990.

Then there are the political risks. Mr. Xi’s comments on February 3 suggest he is certainly aware that that the Party’s credibility has been hit by its handling of the crisis. There is an outpouring of anger towards the provincial leadership, and people are asking if China has progressed or regressed since the botched handling of SARS 17 years ago. “Transparency does not cause panic, the only source of panic is an absence of truth,” the respected magazine Caixin said in an editorial. “That is the lesson SARS taught us 17 years ago, and this has proven it again at a terrible cost.”

At the same time, it’s simplistic to assume that every piece of bad news in China hurts Mr. Xi. If the country emerges quickly from the epidemic, an outcome the world will be hoping for, Mr. Xi may well frame it as a defence of the robustness of the Chinese system and further push the political tightening and centralisation that his two-terms have seen. The initial cover-ups, which have brought enormous costs to the people of Wuhan, will become a footnote on the road to rejuvenation.

Watch | Bats and the novel coronavirus

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Printable version | Apr 11, 2021 7:52:30 PM |

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