On October 16, 2022, the world eagerly anticipated the beginning of the 20th National Congress of the Chinese Communist Party. Every five years, delegates representing the Chinese Communist Party’s (CCP) 96.7 million members gather to elect its leaders. It’s widely expected that Xi Jinping will be re-elected as the CCP general secretary for a third term, which would be unique since Mao Zedong’s time. In his introductory remarks, Xi supported China’s zero-Covid strategy for the coronavirus outbreak and emphasized continuity over change. On the eve of the National Congress, the anti-Covid approach triggered a rare political demonstration on Beijing’s Sitong Bridge. China is one of the only countries still adhering to a zero-Covid policy, which entails intensive testing and whole or partial lockdowns when instances are discovered. In the spring, when most of the world removed their face masks and decided to coexist with the virus, the Chinese government imposed a two-month lockdown on Shanghai. In September, more than thirty cities were entirely or partially isolated, affecting about sixty-five million people. China has also stifled incoming international travel by requiring up to 10-day quarantines for entry, restricting visas, driving up ticket prices to the stratosphere, and cancelling flights frequently.
Interestingly, real estate bubbles always burst in the same places: extensive city suburbs, abandoned farmlands, and empty lots with rows of empty concrete shells rising above roads. These are closed to traffic and happy billboards advertising middle-class dreams. “Central Mansion,” says one of these signs in a neighbourhood about 30 miles (50 kilometres) from the centre of Beijing. There are unfinished projects everywhere, including a group of apartment buildings owned by Evergrande. The Chinese developer is the most indebted real estate company in the world and has become the face of China’s deflated real estate market. At the entrance to Evergrande’s Royal Peak apartment complex, there is a gatehouse with a QR code that people must scan to prove they are not Covid. China’s ambitious “zero-Covid” strategy has led to many empty buildings and Covid checks, which have come to represent the problems facing the world’s second-largest economy.
Mid-October, the International Monetary Fund (IMF) said that the Asian giant’s slowing economy is one of three major threats to the world economy. The other two are Russia’s invasion of Ukraine and persistent inflationary pressure. In the World Economic Outlook report, which came out on October 11, the international lending agency based in Washington, DC, cut China’s actual GDP growth projections from 8.1% in 2021 to 3.2% in 2022 and 2.7% in 2023. This is a long way from Beijing’s goal of a 5.5% increase in GDP by 2022. When China stumbles, the rest of the world takes notice.
The IMF is among many who think bad things will happen to China. The World Bank believes that the country will no longer be Asia’s most important economic engine as it has been for the past 30 years. It is a because of global uncertainty, falling domestic consumption, and falling exports. As a result, it predicts that China’s GDP will grow by only 2.8% in 2022. It is the first time since 1990 that China will grow less than other East Asia and Pacific countries.
According to the World Bank’s economic forecast, China’s slowdown has been caused by the same things: anti-Covid measures that disrupt supply chains, industrial and service production, and domestic sales and exports, and a real estate sector that is already having problems that are made worse by developers taking on too much debt. However, on a somewhat positive note, the World Bank said that the country’s “systemically important banks have limited direct exposure to real estate sector lending.”
As the year goes on, more signs of trouble have shown up. Exports of goods made in China have been going down. Caixin, a Beijing-based business and financial news outlet gathered data showing that export growth dropped from 23.9% year over year in the third quarter of 2021 to 12.3% in July and August of this year. In addition, Caixin said that growth in the service sector stopped in September after three straight months of development. The manufacturing activity index has also been going down for two consecutive months.
The policy for keeping Covid in check will remain the same. People’s Daily, which the CCP owns, recently put out an article that defended the “dynamic zero-Covid” strategy and praised its results. Leaders in China say it is more profitable to try to stop each outbreak before it spreads and overwhelms the country’s health system than to try to live with the virus, which is what the US and EU are doing.
China’s leaders have also highlighted the country’s achievements in becoming the global leader in producing solar and wind energy. Foreign direct investment inflows have continued to increase annually. Due to the broader base upon which growth occurs, the country’s economy has been witnessing higher year-over-year expansions than at any other time in history, despite its slowing pace of GDP growth.
Throughout the previous four decades, economic development has been the top priority or one of the top priorities. Within one or two years of the political shock of 1989, economic development and market reform were all reinstated as the Party’s primary objective. However, in recent years, economic development in China has frequently been given a lower priority than other policy objectives. Will this trend continue or reverse following Xi’s third term as the President?