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One of the world’s premier economic engines is running at its lowest speed in decades. And with a shrinking (working) population, among other things, the longer-term prospects for China are not bright either.
Currently, China is struggling with the impact of the rather abrupt shedding of its zero-COVID policy: hundreds of millions of infections, many deaths, overburdened hospitals, companies coming to a standstill and faltering supply lines.
Nevertheless, the chances seem greatest that — despite all the current misery — it will ultimately be something like ripping a Band-Aid off: There will be many victims among the elderly in particular, production will be hit hard and demand will not emerge unscathed either. However, in a few months from now, the worst will be over and by far the vast majority of the Chinese population will have built up some degree of immunity, at least temporarily.
Xi Jinping’s position will not be jeopardized: Many Chinese are more than happy that the strict COVID measures were abandoned, protests have remained relatively small and October’s Party Congress showed how firmly Xi and his clique are in the saddle. All this means that the Chinese economy will probably be able to start a solid upward trend from the second quarter onwards.
In the alternative scenario, COVID will still cause more havoc in China — and for much longer — than is already the case. This cannot be ruled out, as the official vaccination rate of more than 90 percent masks the fact that Chinese vaccines are far less effective than Western mRNA vaccines and that 30 percent of the 260 million over the age of 60 and 50 percent of those over 80 did not receive a booster. The gloomiest forecasts, for example, assume 1.7 million deaths by the end of April. Should such a black scenario become reality, Beijing may be forced to resort to strict measures again, and/or Xi will take an even harder geopolitical stance to divert attention away from domestic problems and to legitimize an even tougher line against unrest.
