Written by Wangruoxi Liang
A year after China lifted its stringent zero-Covid policy with mass testing,
extended quarantine and travel restrictions, the country’s economy is still struggling to
rebound. Consumer confidence improved briefly after the restrictions were lifted and
quickly fell back down to pandemic levels, the retail industry staggered, the real estate
market declined, and foreign investment contracted for the first time since China began
recording it in 1998. As consumers’ confidence eroded, last month, the state extended
its censorship to economic commentary, deploring “false narratives and thinking traps”
that “denigrate China’s economy”.
China’s slow recovery today contrasts sharply with its V-shaped recovery in the
third quarter of 2020, when the pandemic was temporarily brought under control and
economic activities started to return to their normal levels. Many expected that China’s
economy would roar back like it did in 2020, but that is clearly not the case. What went
wrong? Why are consumption, investment and job markets still struggling despite the
government’s efforts to boost confidence in the economy?
One possible answer to these questions is embedded in a Wechat post shared
by a Shanghai writer in 2022, lamenting that “Every day, we are exposed in the media to
all kinds of depressing news…all kinds of structural evils and injustices”. The writer
ended the post saying that “We begin to feel that we have lost control of our destiny,
and political depression is creeping in among the people”. Indeed, the impact of the
three years of zero-Covid policies lies beyond its direct impact on economic activities:
Though many people may be unable to voice such feelings clearly, a mix of
powerlessness, insecurity, and political mistrust are on the rise as people witnessed the
government tightening its grip on the economy and civil society.
The zero-Covid policy was widely disruptive to people’s lives in that it enabled
many people to notice, for the first time, the government and Xi’s unrestrained power
over the country. Yet, in the three years China has wrestled with the pandemic,
countless news and policies also contributed to today’s country-wide political
depression and civilians’ frustration. In 2021, Beijing’s abrupt ban on the $100 billion
private tutoring market backfired with teachers’ unemployment, “black market” private
tutoring, and complaints of the government’s unrestrained power over the market. In
2022, the Chinese internet grew outraged over a video of a chained mother of eight
children in Jiangsu, and a video of men brutally attacking a woman publicly in Hebei,
raising concern of the nation’s corrupted law and order. In the end of 2023, after the
state media announced a Chinese New Year holiday schedule with no legal holiday on
the Chinese New Year’s Eve, the account that made the announcement had to shut its
comment section, which was quickly flooded by indignant Chinese netizens who
claimed that “the government refuses to listen to its people”. Despite the stringent
censorship in the country, such online outbursts from time to time offer clues about the
public’s disapproval and mistrust of its government.
Though China has been an autocratic country since its modern establishment, prior
to President Xi’s rise to power, the nation’s leaders were held accountable by a group of
Politburo. Since the death of Mao Zedong, the political selectorate appointed new
leaders every two terms and regularly removed leaders that were considered
incompetent or inconsistent with the party ideology. Since the 1980s, the economic
reform in the country marked an age of “economism”, when economic rationality,
pragmatism, and radical political discussions prevailed. However, since Xi’s rule in
2012, the accountability system largely weakened as the president neutralized his
political opponents in the party with a sweeping anti-corruption campaign and
consolidated his power. The president soon moved to tighten the grip on freedom of
speech, cracked down on some of the country’s most successful business elites, and
eventually removed the term limit of China’s presidency in 2018. As the accountability
system diminished and the Xi personality cult rose, the economy and the private sector
were at the mercy of the party.
In the end, the confidence crisis in China’s Economy can largely be attributed to
the nature of its institutions: From the perspective of development economics, an
inclusive institution is the basis of economic development in the long run. Inclusive
institutions incentivize innovation, investment, and education. On the other hand, in a
country where people do not trust the government and feel insecure about their future,
their properties, or even their safety, economic development staggers.
Under the threat of military oppression by the regime, active protests, such as the
blank paper protest that called for freedom of speech, are very rare. Yet the ‘silent
majority’, many being unconscious of their low confidence or political depression,
responded to the state’s arbitrary policies and political oppression with their everyday
decisions, reflected in the surging household saving rate, staggering investment, capital
flight, and ever-rising emigration of the elites. In the long term, citizens’ distrust of the
government can hinder economic growth, which leads to further questioning of the
government’s legitimacy. Such downward spiral in confidence and growth has been
witnessed in other authoritarian regimes, such as Russia, Venezuela, and Turkey. To
boost its economy, China has pledged fiscal expansion and interest rate cuts in the new
year, but for countless Chineses, the country that let them thrive is slowly slipping away.
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