Ten years of President Xi Jinping trying to increase Chinese soft power in Asia risks becoming a big zero.
Ten years of President Xi Jinping trying to increase Chinese soft power in Asia risks becoming a big zero.
For that, Xi has his stubborn embrace of a “zero Covid” strategy rapidly backfiring on the second-biggest economy to blame. The anemic 0.4% growth China produced in the April-to-June period year-on-year is a galaxy away from the 5.5% output Xi earmarked for 2022.
And judging by the Asian Development Bank’s latest numbers, it’s winning Xi few friends in the region. China’s gross domestic product miss is dragging neighbors down, too. ADB just lowered its growth forecast for developing Asia to 4.6% from 5.2% this year largely thanks to slowing Chinese growth.
Yet, as private-sector economists agree, this is likely to prove overly optimistic. The Federal Reserve’s tightening cycle, for example, is still in the early stages. Global inflation continues to slam corporate and household confidence.
Fallout from Russia’s Ukraine invasion on global food and energy costs and supply chains could still get a lot worse. The U.S. dollar’s powerful rally is luring tidal waves of capital away from Asian markets, leaving economies starved for liquidity.
This dynamic has the potential to increase Chinese default risks, another threat to Asia. Over the last year, highly indebted property developers have had trouble making payments on overseas loans. The yuan’s 6%-plus drop this year makes those liabilities even harder to service.
Debt reckoning or not, China’s year is rapidly getting away from Xi—and Asian neighbors who planned to ride its coattails. Xi’s zero Covid obsession—and massive lockdowns of entire metropolises—is out of step with today’s far more transmissible variants.
The answer is better vaccines, smarter contact tracing, testing and savvier mitigation strategies, not forcing tens of millions to shelter in place in this city or that one.
