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Is the CCP’s desperation behind China’s abrupt reopening?

Is the CCP’s desperation behind China’s abrupt reopening?

 


China usually shuts down for the Lunar New Year, but Communist Party leaders have marked the arrival of the Year of the Rabbit with a burst of activity worthy of this wayward animal. They followed their colossal zero-Covid U-turn with a charm offensive to convince the outside world that China is open for business. In many ways, this is as abrupt a reversal as the removal of Covid checks in the first place.

Xi Jinping sent his trusted vice premier and economic czar Liu He to Davos to chat with Western business leaders. In his speech at the World Economic Forum two weeks ago, he mentioned strengthening international cooperation no less than 11 times. He said the door to foreign investors would be opened more.

Back home, a brutal crackdown on tech companies seems to be easing. The message is that the rectification is complete and soothing words have abruptly replaced threats. Xi’s talks of a common prosperity code for greater state control are also over, which has cast a cloud over domestic businesses and foreign investment. Premier Li Keqiang has vowed to deepen reforms to boost market vitality and public creativity, according to Xinhua, the state news agency, the kind of pro-market language that has become rare in Xis China.

There is an element of desperation in the sudden talk of economic openness and reform

It also seems that China wants to regain its real estate bubble. Restrictions on heavily indebted property companies are also being lifted and money is being pumped into struggling developers. Meanwhile, Zhao Lijian, the most public face of China’s aggressive wolf warrior diplomacy, has been diverted from his post as Foreign Ministry spokesman to a backroom role in managing border disputes. He had used the ministry desk to spout xenophobia and peddle conspiracy theories, while trolling and snarling on Western social media.

Even those hardened to Beijing’s opaque decision-making suffer a form of whiplash, struggling to figure out what it all means and if it’s real. Are they permanently open for business or is this just a short-term effort to get the economy back on track? asked Julian Fisher, vice-president of the British Chamber of Commerce in China, during a briefing in parliament this week organized by the backbench China Research Group. How fast will the door close? he added. The Chambers’ most recent survey of sentiment among members, admittedly undertaken while zero-Covid was still in place, was the most pessimistic ever; businessmen have left China in droves, jaded and embittered.

China watchers are also confused, with some wondering if Xi is now fully in control. Something went wrong, a former senior US intelligence official told me. Xi Jinping might have changed his mind, but he might well have changed his mind for him.

Just a few weeks ago, Xi appeared to be at the peak of his powers. He appeared to have eliminated all opposition and cemented an unprecedented third term in office. Chinese history is full of sharp elbows and leaders are most vulnerable at the height of their power, says Anne Stevenson-Yang, founder of J Capital Research, who has spent more than 25 years in China. She thinks Xi is being quietly pushed aside. All of its major policies have been reversed 180 degrees, she says.

It may be wishful thinking, but Xi has certainly been damaged by the zero-Covid debacle and the haphazard reopening of the country with little obvious planning or preparation. Official propaganda claims that the virus has peaked, the country has come out of the worst, and in any case China has done better than everyone else.

But anecdotal evidence says otherwise as Covid tears through more remote areas, aided by mass migration for the Lunar New Year. Officials say two billion trips will be made during the holiday period. The official Covid statistics are not credible and the independent modeling is uniformly disastrous. British health data company Airfinity, however, predicts that up to 1.7 million people could die in the coming weeks.

There may be a simpler explanation for the sudden talk of economic openness and reform that is tactical and cynical. There is almost an element of desperation about it, an expression of the seriousness of the economic situation and the seriousness of the credibility crisis facing the party. The economy is almost at a standstill. This is partly the result of Covid restrictions, but also of longer-term issues ranging from the bursting of the property bubble (with property accounting for up to a third of the economy) to geopolitical tensions and shrinking Population. Urban youth unemployment stands at nearly twenty percent. The rhetoric among foreign companies is that China under Xi is becoming uninvestable.

There is no doubt that the reopening will bring a rebound to the economy. But is it a dead cat bounce? Fisher asked. It becomes more and more uncertain because power is more and more centralized. I don’t think anyone can bet on China’s future, he warned. There is much concern that ideology trumps economics

Chinese leaders have also been shaken by the intensity of the protests last November, which arguably played a role in the abandonment of zero-Covid. Their worst fear will be that of a population emboldened by the apparent success of these troubles. Protests rumbled during New Year celebrations: there was a massive defiance of the nationwide fireworks ban and clashes in places where police tried to enforce it. The demobilized zero-Covid law enforcement army also protested the sudden layoffs and demanded back pay they say they owe.

Many who study recent Chinese history will tell you that it is punctuated by periods of relative openness and then closeness. Reformers and liberals compete for influence with conservatives within the system, the argument goes. There is some truth in that, but even during periods of relative openness, the overriding prerogative has always been the survival of the Communist Party. This is what prompted Supreme Leader Deng Xiaoping to launch reform and opening up in the first place, and he was not a liberal.

Perhaps the best way to interpret the apparent new commitment at the open (if followed by a big if) is that the parties’ instinct for survival has kicked in again. He is desperate to get the economy back on track by any means necessary, and that his (and Xi’s) future depends on his ability to do so.

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