China Watch: Limits To Beijing’s Policy “Reset”

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China’s abrupt economic reopening and diplomatic reengagement signaled a pragmatic streak in President Xi Jinping’s decision-making, which offers an opening for improving relations with the West.  Popular protests against the “zero-COVID” policy and the slowing economy almost certainly prompted Xi to change course. 

• Since November, Xi has been pursuing a diplomatic charm offensive, emphasizing to world leaders that China is committed to globalization and economic cooperation and welcomes foreign investment.  US Secretary of State Antony Blinken is scheduled to visit China in early February, in a sign that both Beijing and Washington desire stable relations.  
• Qin Gang, China’s new foreign minister, has taken a more conciliatory tone than his predecessor and is generally viewed as a moderate.  Notably, the ministry in January reassigned Zhao Lijian, a bellicose ministry spokesperson, to a less consequential post.
• China is moving to repair relations with Australia, lifting the ban on Australian coal imports in January.  Bilateral relations soured after Australia called for an investigation into the origins of COVID in 2020.

Since ending the “zero-Covid” policy in early December, Chinese policymakers have emphasized economic growth, particularly boosting consumer spending, employment, and the real estate sector.  Beijing is counting on the current COVID wave to subside by the second quarter of 2023.  Xi likely calculates that he has some wiggle room to experiment with COVID policy until the new cabinet—headed by his close ally Li Qiang—assumes power in March 2023.    

• Western economists estimate that the economy will grow by about five percent in 2023, assuming China does not reimpose lockdowns, but the economy is likely to continue to struggle in the first quarter due to surging COVID cases.
• According to a Chinese epidemiologist, the latest surge in cases, which started in late November, is likely to last two to three months, with infections spreading to the countryside next.  Another surge is expected after Chinese New Year on 22 January, as migrant workers return to their home villages.
• Mass infections are likely to overwhelm China’s rural health system, which is far less equipped to handle a wave of severe COVID cases.
• Consumer spending continues to suffer.  Although local governments are encouraging workers with mild symptoms to keep working, some factories are experiencing labor shortages as sick workers stay home.   

The concentration of power in Xi’s hands—particularly after the Party Congress in October—suggests that the current reopening and pro-growth policies could change without advanced notice.  A late December meeting of senior Communist Party leaders reaffirmed Xi’s political dominance, calling for loyalty to him as the “core” of the Party leadership. 

As the death toll skyrockets, public criticism against the government’s chaotic reopening is rising.  If the current wave of infections extends beyond the first quarter of 2023, Xi’s may revert to his authoritarian tendencies and could reimpose some of the previous restrictions to contain the pandemic. 

• A spike in online criticism against the sudden reopening has prompted Beijing to shut down or suspend more than 1,000 social media accounts belonging to the most vocal critics.
• Some of these critics have sizable online followings.  They hold hardline nationalist views and see the abandonment of “zero-COVID” as a capitulation to foreign pressure and liberal ideas.  Xi likely pays attention to this segment of society, who has strongly supported his authoritarian policies.  
• On 14 January, China’s National Health Commission reported that 59,938 COVID-related deaths had been recorded between 8 December 2022 and 12 January 2023.  However, the international community remains concerned that China is underreporting COVID deaths.  A London-based health data firm estimated in late December that as many as 9,000 people per day might be dying from COVID.   

Beijing’s current diplomatic charm offensive does not alter the underlying factors causing friction with the West and its neighbors.  Beijing’s opaqueness regarding the true extent of its COVID outbreak and dismissal of international criticism work against its diplomatic efforts.

• China continues to blame foreign countries for its COVID policy shortcomings.  On 10 January, Beijing stopped issuing some short-term visas to South Koreans and Japanese in response to what it calls “discriminatory” actions by the two countries to require negative COVID tests for travelers from China.
• Neither Washington nor Beijing expects fundamental breakthroughs on human rights, trade, and technology, as the United States and its allies reach consensus on limiting China’s access to advanced technology.  In December, the Netherlands and Japan agreed to join the United States in banning the sales of advanced semiconductor equipment to China.