China pivots on Zero COVID as the G7 price cap on Russian oil exports goes into effect. And that’s just one example of a new move to values-aligned trade blocs. Plus: The upward trajectory of lithium battery and tin prices, Russian coal exports, and Germany’s efforts to diversify away from China.
China is rapidly dismantling its zero-COVID industrial complex. Party propaganda has shifted into overdrive to reverse the official narrative of the past three years — that draconian lockdowns are a necessary price to protect the basic human right to life, and are price that the authoritarian CCP, unlike democracies, is able to pay. (And, fun fact, recent reporting suggests that this is turnaround is not only a function of hot-button developments like the widespread protests of recent weeks, but also of pressure from the Foxconn founder, who wrote a letter arguing that strict COVID controls would undermine Beijing’s central position in global supply chains.)
Now that China is easing pandemic restrictions, a surge in cases and deaths will inevitably follow. Where does that leave the grand bargain that the Party has forced on its citizens since 2020?
For now, Beijing is opting for a tried and tested strategy: Control the narrative. That means trotting out experts to declare that SARS-CoV-2 is, in fact, not so bad after all — never mind the drastic lockdowns, shutdowns, and forced quarantines of the past three years. To give an example: Zhong Nanshan, the famed respiratory disease expert who helped shape Beijing’s COVID strategy, told state media on Friday (Dec. 9) that the Omicron variant was “not scary” and that 99 percent of all patients would “fully recover” within ten days.
As Beijing pivots from maximizing to minimizing the COVID threat, the country is likely to follow a pandemic trajectory much like that of other countries: Heightened deaths (both COVID-related and not), a costly epidemic of long COVID, increased pressure on the health system, and an appreciable loss of labor productivity, for example. And a wildcard: China’s elderly are notoriously under-vaccinated. Will mass COVID deaths among that population spark social unrest?
The economic trajectory is less clear. China hopes to achieve 5 percent GDP growth next year; JPMorgan analysts think it’s possible with a pivot away from COVID Zero. That’s optimistic given where the country’s economy is now: November saw a worse-than-expected downturn in trade, with exports and imports plunging 8.7 percent and 10.6 percent, respectively — far more than the 3.8 percent and 7 percent analysts had forecast. And there’s the lingering question of whether a surge in COVID deaths might lead Beijing to backpedal on easing restrictions. But here’s one thing we can count on: If Beijing is expending the reputational capital to reverse its COVID policy for the sake of economic growth, it will likely put its money where its mouth is, launching new incentives, investment projects, and plans to hit desired targets.