China is blowing its chance to be the king of the world

The lesser political poison for the Party is to persevere with zero-COVID. It cannot risk a repeat of the scenes in Hong Kong after the authorities reopened abruptly in a society of endemic vaccine scepticism, with only 44 per cent of the over-80s fully jabbed.

The virus ripped through nursing homes. Dead bodies piled up in hospital wards mingled with live COVID patients because the mortuaries were full. The ratio of declared COVID deaths per million in Hong Kong so far has been 1,411, compared to 578 in Korea, 387 in Japan, and 301 in Singapore.

The outcome in mainland China would be an order of magnitude worse, both in scale and intensity. China has three nurses per 1,000 inhabitants compared to eight in Hong Kong (most OECD states have around 12). It has half Hong Kong’s ratio of intensive care beds. It has the same levels of vaccination resistance among the elderly, and those jabbed have been limited to patriotic vaccines for the higher cause of national prestige.

To let rip would pose a greater risk to Party supremacy than the current protests, astounding as they are.

“Unless efforts to vaccinate the elderly and boost healthcare capacity ramp up very quickly, we will remain sceptical that China will abandon zero-COVID next year,” said Capital Economics.

Investors should assume that China will reimpose the sort of lockdowns seen at the outset of the pandemic in Wuhan (11 weeks) or earlier this year in Shanghai (eight weeks). The Wuhan episode led to a 20 per cent drop in national output over three months, although the authorities have since streamlined the process.

Those betting that China will become the world’s economic epicentre by the middle of this century have fundamentally misjudged the economic and political forces at work.

The immediate consequences of this aborted reopening cut two ways for the world economy. China will not provide a countercyclical buffer as America slows and Europe goes into recession, as markets had assumed just 10 days ago, and as it was able to do in 2009 with its post-Lehman credit blitz.

It will instead compound a synchronised downturn across all major blocs of the international economy. The Great Lockdown reinforces the Great Disinflation of 2023 and should alleviate the cost of living shock in Europe, ceteris paribus. Needless to say, Vladimir Putin may yet complicate the calculus with another twist of his energy war.

China is now trapped by its own COVID propaganda. It deployed the state media to deprecate western vaccines, entrenching vaccine scepticism among older Chinese suspicious of modern medicine.

It ridiculed the democracies for their chaotic response to the virus. It sacralised the total suppression of COVID as proof of China’s superior governing system and civilisation, and as irrefutable vindication of Communist Party rule. There is no easy retreat from this state hubris.

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The overarching point is that China’s development model was already obsolete a decade ago. World Bank data shows the productivity growth rate has long since ceased to track the trajectories of Japan, Taiwan, and Korea as they became rich. It has instead collapsed to the level of mature economies but a quarter century too soon, before China has broken out of the middle income trap.

Those betting that China will become the world’s economic epicentre by the middle of this century have fundamentally misjudged the economic and political forces at work.

The disorderly democracies are more resilient and adaptable than they look. And the air is thin at the technological frontier for closed repressive regimes.

If there is one lesson to draw from the ghastly totalitarian spectacle of Xi’s zero-COVID it is that there is no mechanism to correct systemic error in an autocracy.

Zero-COVID is not quite the blind ideological madness of Mao’s Great Leap Forward, but it is running a close second.

Telegraph, London

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