The Covid-19 outbreak has not dented President Xi Jinping’s ambitions for the great rejuvenation of China. It has, however, amplified China’s risks, even as the Chinese Communist Party claims that the country’s response was successful and validates its political system. Xi Jinping’s political dominance, the end of collective leadership, and rise of the CCP’s role in all aspects of society and economy leaves him particularly vulnerable should China fail to contain fallout from the epidemic and grow the economy. Alternatively, should the Party continue to prove its resiliency and ability to suppress dissent, manage public perception and oversee an economy increasingly dominated by the state, Xi Jinping stands to gain domestically, even if it comes at the expense of China’s standing around the world.
As Covid-19 cases decline in China and increase elsewhere around the world, China’s leaders and propagandists are revelling in the CCP’s success in containing the virus. While China’s propaganda apparatus trumpets the country’s provision of technical and material assistance to its friends around the world, it reflects a tin ear for the concerns of recipient countries whose publics increasingly realise that the loss of manufacturing capacity leaves them dependent upon China’s conditional largesse.
Aside from Europe, this is particularly the case for the US. Articles in Chinese state-media threatened to withhold exports of medical equipment and pharmaceutical products, and officials float conspiracy theories that the US was the source of the virus which was first detected in Wuhan, and subsequently covered up by Chinese authorities. Already strained bilateral relations have nose-dived as a result of the pandemic, creating a new degree of risk for China once the public health situation returns to normal.
While Xi Jinping’s status at home has been bolstered by the outbreak, domestic frustration with the government has grown and China’s image abroad has suffered. The initial coverup and politicisation of public health, like all aspects of Chinese society, reflect the underlying fragility of the country’s system of governance, which has increased censorship, eliminated civil society and reduced the private sector’s role in the economy, intensifying both social and economic risks. Of particular concern to China’s citizens, the outbreak revealed the shortcomings of the country’s medical system, which attempted to institute reforms in 2009, as well as the failure of the infectious disease reporting system developed after the 2003 outbreak of severe acute respiratory syndrome.
Public frustration with the CCP and government boiled over at the height of the outbreak. Dissatisfaction over the cover-up, aggressive censorship, and disruption to lives and livelihood affected middle-class perceptions of China’s leadership, governance and the sudden appreciation of individuals’ powerlessness in the Chinese polity.
The average person in China was able to ignore curbs on individual freedoms when the social contract provided improving quality of life and material wealth. But urban lockdowns, intercity travel bans and social controls implemented by work units and neighbourhood committees reflected a pre-1979 society that Chinese citizens have no desire to return to.
Wuhan residents, quarantined in their privately-owned apartments – something unheard of 40 years ago – heckled politburo member Sun Chunlan on an inspection tour of the housing compound, yelling out the windows, ‘Fake! Fake!’ to express their discontent with the treatment they had received and the Potemkin tour organized by local officials.
The economic impact of the pandemic presents myriad risks to China and Xi Jinping himself. Xi is unlikely to achieve key, high-profile political-economic targets, including the goal of achieving a ‘moderately well-off society’ this year, which may hurt his stature within the Party.
As China’s businesses begin to restart, China faces not only the lack of economic activity from its lockdown, but a global economic slowdown. This will weaken demand for China’s manufactured goods, even as Chinese officials press firms to restart production.
Injections of liquidity for the banking system will worsen China’s debt-to-GDP ratio, which was more than 300% before the outbreak. Plummeting global consumption and falling exports will put further pressure on the weakening renminbi. China’s state-owned enterprises will become mired even deeper in debt, worsening the balance sheets of China’s banks. China’s four major asset management companies, founded in 1998 to off-load the bad debts of China’s banks in the aftermath of the 1997 Asian financial crisis, will probably be key players in a necessary re-structuring. A fifth AMC was just created, potentially foreshadowing a near-term write-off effort.
While the financial sector in China grapples with the stresses brought on by Covid-19, how the Chinese public deals with an economic slowdown, and how the CCP manages the social risks of a weak economy will affect not only the Party’s legitimacy in the eyes of China’s own people, but the global perception of China as well.
Xi Jinping, however, is fortunate to head an organisation that has proven itself to be extremely resilient. His carefully choreographed tour of Wuhan included a visit to a housing complex where police were stationed in every apartment, and state media circulated purported citizen videos taken from apartment windows cheering his presence, fabricating a stark contrast to the heckling Sun Chunlan suffered a few days prior.
Xi Jinping has positioned himself, and the CCP, to take credit for bringing the epidemic under control, while a massive internal security and censorship apparatus has prevented criticisms from being levelled at him or the government. Xi’s grip on power remains firm and potentially even enhanced as China characterises its ‘battle’ over Covid-19 as a victory. Whether the world shares that opinion is another matter.
Drew Thompson is a visiting senior research fellow at the Lee Kuan Yew School of Public Policy, National University of Singapore and a former US Defence Department official, responsible for managing bilateral relations with China, Taiwan and Mongolia.
