The situation in Beijing came to a dramatic head at the beginning of the week. The number of new Covid infections continued to climb on Monday, mass testing was carried out in the eastern district of Chaoyang, and the first residential buildings were quarantined. The result was panic buying and empty shelves in supermarkets. People fear a lockdown like the one in Shanghai. Read in our first feature why even Beijing’s authorities warn about “grim” times for China’s capital, and why current developments could also pose a threat to President Xi Jinping.
And while China’s President Xi Jinping maintains his zero-covid strategy, others have to foot the bill: for the countless Covid tests every day, for checks in residential areas, on street corners, district and city borders, or for the construction of entire isolation centers. Not to mention lost revenue and tax payments: Shanghai alone accounts for 3.8 percent of China’s GDP. Christiane Kuehl has taken a look at the total cost of China’s zero-covid policy and which industries suffer the most under Beijing’s tough regulations.
Chinese students are the largest group of foreign students in Germany. Despite Covid, the majority of new foreign students in the 2020/2021 winter semester came from China. However, what appears to be a privilege in retrospect often proves to be a huge challenge in everyday life. Whether linguistic, cultural or simply culinary – Frank Sieren shows the problems and cultural differences Chinese students have to overcome in Germany.
Finally, I would like to draw your attention to today’s opinion piece by Stefan Sack. The former Vice President of the European Chamber of Commerce in Shanghai reviews the idea of “change through trade” and comes to the conclusion: The approach has certainly paid off – just not in the way the West had hoped. It is the West that adapts to China’s way of doing things. Sack calls for a new approach.
On Monday, people patiently lined up in meter-long queues in the Chaoyang district. Waist-high barriers ensure distance and order. At the end of the lines, inspection officers covered in protective clothing wait to mechanically take swabs from the throats of those waiting. Several million times, on Monday alone, in the Chaoyang district alone.
Chaoyang is Beijing’s largest district, and authorities had ordered mandatory PCR testing for district residents (China.Table reported). That is 3.5 million people. They all have to be tested every two days this week alone: on Monday, Wednesday and Friday. In addition, individual apartment blocks and several neighborhoods in the district were sealed off early this week. Its residents are not allowed to leave the area until further notice. The first restaurants and entertainment venues were also closed.
And yet, the number of new Covid infections continues to rise. After a few dozen Covid infections over the weekend, authorities reported 29 new cases on Monday. This brings the number of recorded new Covid infections to at least 70. And the outbreaks have long since spread to other districts. According to official figures, 8 of Beijing’s 16 districts have already been affected. As a result, the city government announced late Monday evening that it would extend mass testing to ten more districts as well as one economic zone.
Unrest amongst Beijing residents grows. They fear the vicious cycle of China’s zero-covid policy: If more testing is carried out, more infections will be registered. This leads to tighter restrictions and more testing, which in turn leads to more infections.
This led to panic buying and empty shelves in Beijing’s supermarkets on Monday. Many stores were barely able to cope with the rush of panicking customers. In many places, residents stocked up on food and other supplies such as vegetables and fresh meat. But even durable items such as instant noodles and toilet paper sold like hotcakes. The state-owned newspaper Beijing Daily reported that supermarket chains like Carrefour and Wumart had more than doubled their stocks and extended their opening hours.
But online retail is also affected. The grocery section of e-commerce service Meituan also reportedly increased its stocks and increased its sorting and delivery staff. One online retailer told the Beijing Evening News that it sold 300 freezers on Sunday alone – about as many as it usually sells in a month.
Beijing’s authorities then warned on Monday of “grim” times for the capital. They fear that the virus has already been spreading undetected in the 21-million metropolis for a week and that significantly more cases could now be found. Initial observations indicated that “schools, tour groups and many families” were mainly affected, an official said. A quarter of infected individuals are over 60, with half of them not vaccinated.
At a press conference, the director of the Communist Party’s Municipal Information Office told reporters that decisive action must now be taken: “Prevent deaths, act quickly, identify and control risks as soon as possible, uncover the origin of cases, organize PCR testing, and break the chain of virus transmission.”
In addition, Beijing’s administration has imposed strict entry regulations: Anyone who wants to enter Beijing has to present a negative Covid test, which must not be older than 48 hours. Anyone who has visited cities or counties where at least one Covid case has been reported in the past two weeks is not allowed to enter the country at all.
But a look at Shanghai shows how difficult it is to combat the Omicron variant of the virus. The financial metropolis on the Yangtze Delta has been in a total lockdown for weeks – and the situation is still not under control: In society, anger over tough measures is growing: Over the weekend, a video entitled “Voice of April”(四月之声) caused a stir on social media (China.Table reported). And the epidemiological situation is hardly any better: Experts expect that it will take weeks before the situation could improve permanently. To make matters worse, neither Shanghai nor Beijing authorities have any idea where these new infections are coming from.
Whether a lockdown would be placed on all of Beijing or only some districts would depend on how far the virus has spread, an expert from the national health department told the Global Times. “When results of the nucleic acid testing in Chaoyang and other areas come out, it will give us a picture of the overall epidemic situation in Beijing. More measures will follow in accordance with it,” an official said.
The fact that the Omicron wave now races toward Beijing also puts increasing pressure on China’s political leadership. Xi had ordered that the capital of China must remain free of the virus under all circumstances. A prolonged shutdown – or even a total lockdown lasting weeks, as in Shanghai – would greatly increase the political and economic pressure on his government.
“Xi Jinping is trapped in his own policies,” China expert Eberhard Sandschneider tells China.Table. Xi would continue to stick to his strict policy. “As I hear from sources at various levels, authorities are still doing everything they can to meet Xi’s directives. But resentment is growing rapidly.” Economically, the damage is taking on greater proportions. According to a study by international experts, China’s zero-covid policy already costs the country at least $46 billion – per month. An additional lockdown in Beijing or another metropolis like Shenzhen would dramatically increase the damage.
But resentment also grows within Chinese society. China expert Sandschneider warns: “This explosive mixture could even become a threat to Xi Jinping himself.”
Tens of thousands of beds for isolation wards, regular Covid tests for 25 million people, barriers, controls – not to mention lost tax revenue caused by all the business closures: The cost of zero Covid for China’s municipalities is enormous. Only a handful of economic sectors in Shanghai currently operate halfway efficiently. The port, for example, or the stock exchange – or online food delivery services. According to a report in the South China Morning Post, one month of lockdown alone will reduce Shanghai’s aggregate real income by 2.7 percent.
SCMP also cites research papers from Tsinghua and Zhejiang Universities, the Chinese University of Hong Kong and Princeton University in the US, according to which China’s zero-covid policy is likely to cost the country at least $46 billion per month in lost economic output. That would be equivalent to about 3.1 percent of gross domestic product, the study found. March production of some industrial goods fell dramatically compared to the same month last year, with crude steel production down by 6.4 percent and automobile manufacturing down by 4.9 percent. The consumer sector, services and the fragmented logistics industry were also hit hard.
Meanwhile, the number of cities imposing Covid restrictions continues to grow. As of April 11, 87 of China’s 100 largest cities have enforced some form of movement restrictions, according to economists at Gavekal Dragonomics. Restrictions range from “who can enter or leave a city” to full lockdowns like the one in Shanghai. Only 13 of China’s 100 largest cities currently have no restrictions at all.
But as more cities imposed lockdowns, the severity of municipal lockdowns eased somewhat. From the end of March to April 13, the number of major cities with strict lockdowns dropped from 14 to 6, according to Gavekal. As a result, the share of fully locked-down cities in China’s economic output also decreased from 14 percent to 8 percent. But this share could rise again at any time, given the high transmission rate of the Omicron variant. And Shanghai alone already represents 3.8 percent of China‘s GDP.
The lengthy lockdown of the metropolis could reduce China’s monthly economic output by 2.5 to 3 percent, estimates Michael Song, professor of economics at the University of Hong Kong – based on the model used in the study by the four universities, which examined truck traffic flows from 315 cities dating back to January 2019. According to the study, both Shanghai’s truck flows and real income will shrink by 54 percent. Truck traffic accounts for about three-quarters of the nation’s total freight volume, according to statistics from the Ministry of Transport – which makes it a useful indicator, according to Song. He estimates that a one-month shutdown of the four largest cities – Beijing, Shanghai, Shenzhen and Guangzhou – would melt GDP by 8.6 percent.
China’s strict COVID-19 blocks and travel restrictions have created a nightmare for the logistics sector – which in turn weighs on production, domestic trade and exports, and in fact the entire economy. Truck traffic across the country is down 40 percent since mid-March, wrote Ernan Cui of Gavekal. In Shanghai, it is down to just 15 percent compared to normal levels. Almost all of China’s 17 million-plus truck drivers are owners: about 90 percent own their trucks. “There are fewer and fewer truck drivers available who do not have a travel history that comes with some kind of Covid exposure risks,” Cui writes. Shipping times are getting longer, and transportation costs are rising. On top of that, there are reports of truckers temporarily trapped in their trucks at local borders. Health workers even taped the doors shut in some cases.
Among those worst hit by Covid measures is transportation in the manufacturing stronghold of the Yangtze River Delta. As a result, the State Council pledged to issue more special vehicle passes for truck traffic between Shanghai and neighboring cities such as Suzhou and Hangzhou. The Ministry of Transport also ordered that Covid test checkpoints would no longer be set up along main highway lanes in the Delta, to ensure smoother transportation. Shortly before, the Jiangsu provincial government had ordered the lifting of roadblocks at more than 50 highway intersections. The local EU chamber had also called for unifying regulations for truckers in the Delta.
China’s Vice Premier Liu He also ordered the introduction of nationwide valid COVID-19 test certificates to allow truck drivers to deliver raw materials, components, food and essential goods between provinces without having to wait for results at each stop.
There are fears that after a still reasonably robust first quarter with 4.8 percent year-on-year growth (China.Table reported), the slump could now follow after April. In early April, Premier Li Keqiang warned local authorities to show greater “urgency” in stabilizing the economy. State leader Xi Jinping, meanwhile, continued to be unfazed by the problems. Speaking at the Bo’ao Economic Forum on Thursday, Xi stressed that the Chinese economy has “strong resilience” and “enormous potential” despite the current challenges.
Xi stoically sticks to his zero covid policy. But local governments are the ones who have to enforce all those roadblocks and other lockdown measures. They are particularly strained because they have to bear a large share of the costs themselves since 2021. Costs that keep rising due to the high transmission of the Omicron variant. To date, there are hardly any detailed figures on the actual costs for municipalities. But Suzhou reported it already had to spend ¥120 million (€17 million) in February to fight an outbreak that started on February 13 – on protective equipment, PCR tests, infrastructure and medical care. And this had been just a small outbreak. One can only imagine how much money Shanghai currently has to cough up.
Aid measures for the local economy also cost money: The governments of Shenzhen and Dongguan lowered fees and taxes in March to ease the burden on businesses hit by the pandemic. Dongguan announced it would provide ¥1,000 to each household in outbreak-affected areas.
Whenever German chancellors traveled to China, they always carried the wishful thinking of change through trade in their luggage. The logic behind it: Through intensified business relations between China and the West, the People’s Republic would gradually become more liberal, perhaps even democratic someday.
China would automatically join the winning system of liberal democracies and a rules-based world order after the economic liberalization under Deng Xiaoping and its unprecedented economic rise, it was believed.
And indeed, 20 years after China’s accession to the World Trade Organization, the principle of change through trade has come to fruition. But not in the way we had anticipated, but the other way around. Through trade with China, we Germans in particular have also begun to change.
We have bitterly awoken from our beautiful dream. The dependencies of our supply chains and the greed for new growth markets have maneuvered us into a situation in which we now adapt our behavior to Chinese sensitivities. Our dependencies on the Chinese market are now so great that Beijing is using them against us in a “divide et impera” process – divide and conquer. We must finally admit to ourselves and discuss the fact that we are now behaving in this way to avoid Chinese punishment.
We exercise caution whenever we post China-related comments on social media. Corporate bosses bite their tongues to avoid almost any public criticism of China. And even our government is extremely careful not to give Hong Kong human rights activists, exiled dissidents, or even the Dalai Lama too much of a stage, if any. We tolerate the fact that Western online platforms are blocked in China, while China’s propaganda machine here uses Twitter and the like to sway public opinion.
The confidence of the West in its own strength, which apparently grew immeasurably after the Cold War, seems to have blinded many. However, the fact that the People’s Republic has other things in mind than just buying Western goods and accepting Western values apparently did not occur to us. Since joining the WTO, China has perfectly managed to instrumentalize it for its benefit.
The Chinese dream, which President Xi Jinping has formulated as a vision, fuels pride in what has been, but also aspiration to the top. This is not inherently wrong. As the West, however, we must be clear that this Chinese dream is based on the rise of a collectivity that is founded on a different system of values instead of promoting individual freedom and personal development.
Could we have known on what foundation the Chinese dream would grow? It seems that omens such as Document No. 9, which lead to a seven-year prison sentence for journalist Gao Yu’s for publishing it, have been forgotten. Democracy and journalism on the Western model, a civil society, universal values such as human rights, the rule of law or democracy were just as clearly rejected in Document No. 9 as an economic system more characterized by private enterprise than socialism. A look at the Chinese constitution (Article 7), which states the primacy of the state economy, would also have been helpful.
Yes, we could have and should have known all this. We could have put more pressure on China to comply with a global framework of rules, instead of hoping for change through trade in the wake of growing interdependence. Without Western investment, China was and is still unable to deliver on the promise of bringing moderate prosperity to its vast population.
Instead, Western companies have accepted decades of access barriers to the Chinese market through joint venture requirements, forced knowledge transfers, or excluded industries, while Chinese companies have been allowed to acquire port facilities and power grids in Europe, or build highways and other infrastructure.
The hope that China would join the Government Procurement Agreement (GPA) has not yet been fulfilled, even after 20 years of WTO membership. The de facto impossibility of winning important tenders in China as a foreign company has been ignored for too long. It is only in the last few years that reciprocity seems to be part of our diction.
Too late. In the meantime, mega-corporations have emerged in China that have become powerful (not only, but also) through the transfer of foreign expertise and enjoy competitive advantages far beyond the Chinese market thanks to government support.
During my time at the European Chamber of Commerce, I have been criticized more than once for the use of the term reciprocity. Today it is clear that it is the right, rules-based foundation for peaceful coexistence and common development. Solving global problems also works in cooperation with China.
No player – not even the West, of course – should be allowed to cherry-pick regulations that promise unilateral advantages. But that is precisely what we have allowed China to do for decades. In our democratically constituted societies, we must therefore define what price we are willing to pay for growth and prosperity and draw appropriate lines. The war in Ukraine gives us a prime example of why we need and must assert such clear boundaries.
Stefan Sack, 54, used to work as a management consultant at McKinsey before moving to China in 2005. There, he held numerous senior positions at international companies. Between 2013 and 2016, he was Vice President of the European Chamber of Commerce in Shanghai. Sack has lived in Hamburg since the end of last year.
Chengdu is different from most Chinese megacities. The capital of Sichuan Province is a kind of alternative center for creative minds, as far as a dictatorship even allows alternatives. And there is a lot to see here, too. The Anshun Bridge over the Jin River, illuminated at night, is an absolute eye-catcher. Photo: Dmitry Rukhlenko
The situation in Beijing came to a dramatic head at the beginning of the week. The number of new Covid infections continued to climb on Monday, mass testing was carried out in the eastern district of Chaoyang, and the first residential buildings were quarantined. The result was panic buying and empty shelves in supermarkets. People fear a lockdown like the one in Shanghai. Read in our first feature why even Beijing’s authorities warn about “grim” times for China’s capital, and why current developments could also pose a threat to President Xi Jinping.
And while China’s President Xi Jinping maintains his zero-covid strategy, others have to foot the bill: for the countless Covid tests every day, for checks in residential areas, on street corners, district and city borders, or for the construction of entire isolation centers. Not to mention lost revenue and tax payments: Shanghai alone accounts for 3.8 percent of China’s GDP. Christiane Kuehl has taken a look at the total cost of China’s zero-covid policy and which industries suffer the most under Beijing’s tough regulations.
Chinese students are the largest group of foreign students in Germany. Despite Covid, the majority of new foreign students in the 2020/2021 winter semester came from China. However, what appears to be a privilege in retrospect often proves to be a huge challenge in everyday life. Whether linguistic, cultural or simply culinary – Frank Sieren shows the problems and cultural differences Chinese students have to overcome in Germany.
Finally, I would like to draw your attention to today’s opinion piece by Stefan Sack. The former Vice President of the European Chamber of Commerce in Shanghai reviews the idea of “change through trade” and comes to the conclusion: The approach has certainly paid off – just not in the way the West had hoped. It is the West that adapts to China’s way of doing things. Sack calls for a new approach.
On Monday, people patiently lined up in meter-long queues in the Chaoyang district. Waist-high barriers ensure distance and order. At the end of the lines, inspection officers covered in protective clothing wait to mechanically take swabs from the throats of those waiting. Several million times, on Monday alone, in the Chaoyang district alone.
Chaoyang is Beijing’s largest district, and authorities had ordered mandatory PCR testing for district residents (China.Table reported). That is 3.5 million people. They all have to be tested every two days this week alone: on Monday, Wednesday and Friday. In addition, individual apartment blocks and several neighborhoods in the district were sealed off early this week. Its residents are not allowed to leave the area until further notice. The first restaurants and entertainment venues were also closed.
And yet, the number of new Covid infections continues to rise. After a few dozen Covid infections over the weekend, authorities reported 29 new cases on Monday. This brings the number of recorded new Covid infections to at least 70. And the outbreaks have long since spread to other districts. According to official figures, 8 of Beijing’s 16 districts have already been affected. As a result, the city government announced late Monday evening that it would extend mass testing to ten more districts as well as one economic zone.
Unrest amongst Beijing residents grows. They fear the vicious cycle of China’s zero-covid policy: If more testing is carried out, more infections will be registered. This leads to tighter restrictions and more testing, which in turn leads to more infections.
This led to panic buying and empty shelves in Beijing’s supermarkets on Monday. Many stores were barely able to cope with the rush of panicking customers. In many places, residents stocked up on food and other supplies such as vegetables and fresh meat. But even durable items such as instant noodles and toilet paper sold like hotcakes. The state-owned newspaper Beijing Daily reported that supermarket chains like Carrefour and Wumart had more than doubled their stocks and extended their opening hours.
But online retail is also affected. The grocery section of e-commerce service Meituan also reportedly increased its stocks and increased its sorting and delivery staff. One online retailer told the Beijing Evening News that it sold 300 freezers on Sunday alone – about as many as it usually sells in a month.
Beijing’s authorities then warned on Monday of “grim” times for the capital. They fear that the virus has already been spreading undetected in the 21-million metropolis for a week and that significantly more cases could now be found. Initial observations indicated that “schools, tour groups and many families” were mainly affected, an official said. A quarter of infected individuals are over 60, with half of them not vaccinated.
At a press conference, the director of the Communist Party’s Municipal Information Office told reporters that decisive action must now be taken: “Prevent deaths, act quickly, identify and control risks as soon as possible, uncover the origin of cases, organize PCR testing, and break the chain of virus transmission.”
In addition, Beijing’s administration has imposed strict entry regulations: Anyone who wants to enter Beijing has to present a negative Covid test, which must not be older than 48 hours. Anyone who has visited cities or counties where at least one Covid case has been reported in the past two weeks is not allowed to enter the country at all.
But a look at Shanghai shows how difficult it is to combat the Omicron variant of the virus. The financial metropolis on the Yangtze Delta has been in a total lockdown for weeks – and the situation is still not under control: In society, anger over tough measures is growing: Over the weekend, a video entitled “Voice of April”(四月之声) caused a stir on social media (China.Table reported). And the epidemiological situation is hardly any better: Experts expect that it will take weeks before the situation could improve permanently. To make matters worse, neither Shanghai nor Beijing authorities have any idea where these new infections are coming from.
Whether a lockdown would be placed on all of Beijing or only some districts would depend on how far the virus has spread, an expert from the national health department told the Global Times. “When results of the nucleic acid testing in Chaoyang and other areas come out, it will give us a picture of the overall epidemic situation in Beijing. More measures will follow in accordance with it,” an official said.
The fact that the Omicron wave now races toward Beijing also puts increasing pressure on China’s political leadership. Xi had ordered that the capital of China must remain free of the virus under all circumstances. A prolonged shutdown – or even a total lockdown lasting weeks, as in Shanghai – would greatly increase the political and economic pressure on his government.
“Xi Jinping is trapped in his own policies,” China expert Eberhard Sandschneider tells China.Table. Xi would continue to stick to his strict policy. “As I hear from sources at various levels, authorities are still doing everything they can to meet Xi’s directives. But resentment is growing rapidly.” Economically, the damage is taking on greater proportions. According to a study by international experts, China’s zero-covid policy already costs the country at least $46 billion – per month. An additional lockdown in Beijing or another metropolis like Shenzhen would dramatically increase the damage.
But resentment also grows within Chinese society. China expert Sandschneider warns: “This explosive mixture could even become a threat to Xi Jinping himself.”
Tens of thousands of beds for isolation wards, regular Covid tests for 25 million people, barriers, controls – not to mention lost tax revenue caused by all the business closures: The cost of zero Covid for China’s municipalities is enormous. Only a handful of economic sectors in Shanghai currently operate halfway efficiently. The port, for example, or the stock exchange – or online food delivery services. According to a report in the South China Morning Post, one month of lockdown alone will reduce Shanghai’s aggregate real income by 2.7 percent.
SCMP also cites research papers from Tsinghua and Zhejiang Universities, the Chinese University of Hong Kong and Princeton University in the US, according to which China’s zero-covid policy is likely to cost the country at least $46 billion per month in lost economic output. That would be equivalent to about 3.1 percent of gross domestic product, the study found. March production of some industrial goods fell dramatically compared to the same month last year, with crude steel production down by 6.4 percent and automobile manufacturing down by 4.9 percent. The consumer sector, services and the fragmented logistics industry were also hit hard.
Meanwhile, the number of cities imposing Covid restrictions continues to grow. As of April 11, 87 of China’s 100 largest cities have enforced some form of movement restrictions, according to economists at Gavekal Dragonomics. Restrictions range from “who can enter or leave a city” to full lockdowns like the one in Shanghai. Only 13 of China’s 100 largest cities currently have no restrictions at all.
But as more cities imposed lockdowns, the severity of municipal lockdowns eased somewhat. From the end of March to April 13, the number of major cities with strict lockdowns dropped from 14 to 6, according to Gavekal. As a result, the share of fully locked-down cities in China’s economic output also decreased from 14 percent to 8 percent. But this share could rise again at any time, given the high transmission rate of the Omicron variant. And Shanghai alone already represents 3.8 percent of China‘s GDP.
The lengthy lockdown of the metropolis could reduce China’s monthly economic output by 2.5 to 3 percent, estimates Michael Song, professor of economics at the University of Hong Kong – based on the model used in the study by the four universities, which examined truck traffic flows from 315 cities dating back to January 2019. According to the study, both Shanghai’s truck flows and real income will shrink by 54 percent. Truck traffic accounts for about three-quarters of the nation’s total freight volume, according to statistics from the Ministry of Transport – which makes it a useful indicator, according to Song. He estimates that a one-month shutdown of the four largest cities – Beijing, Shanghai, Shenzhen and Guangzhou – would melt GDP by 8.6 percent.
China’s strict COVID-19 blocks and travel restrictions have created a nightmare for the logistics sector – which in turn weighs on production, domestic trade and exports, and in fact the entire economy. Truck traffic across the country is down 40 percent since mid-March, wrote Ernan Cui of Gavekal. In Shanghai, it is down to just 15 percent compared to normal levels. Almost all of China’s 17 million-plus truck drivers are owners: about 90 percent own their trucks. “There are fewer and fewer truck drivers available who do not have a travel history that comes with some kind of Covid exposure risks,” Cui writes. Shipping times are getting longer, and transportation costs are rising. On top of that, there are reports of truckers temporarily trapped in their trucks at local borders. Health workers even taped the doors shut in some cases.
Among those worst hit by Covid measures is transportation in the manufacturing stronghold of the Yangtze River Delta. As a result, the State Council pledged to issue more special vehicle passes for truck traffic between Shanghai and neighboring cities such as Suzhou and Hangzhou. The Ministry of Transport also ordered that Covid test checkpoints would no longer be set up along main highway lanes in the Delta, to ensure smoother transportation. Shortly before, the Jiangsu provincial government had ordered the lifting of roadblocks at more than 50 highway intersections. The local EU chamber had also called for unifying regulations for truckers in the Delta.
China’s Vice Premier Liu He also ordered the introduction of nationwide valid COVID-19 test certificates to allow truck drivers to deliver raw materials, components, food and essential goods between provinces without having to wait for results at each stop.
There are fears that after a still reasonably robust first quarter with 4.8 percent year-on-year growth (China.Table reported), the slump could now follow after April. In early April, Premier Li Keqiang warned local authorities to show greater “urgency” in stabilizing the economy. State leader Xi Jinping, meanwhile, continued to be unfazed by the problems. Speaking at the Bo’ao Economic Forum on Thursday, Xi stressed that the Chinese economy has “strong resilience” and “enormous potential” despite the current challenges.
Xi stoically sticks to his zero covid policy. But local governments are the ones who have to enforce all those roadblocks and other lockdown measures. They are particularly strained because they have to bear a large share of the costs themselves since 2021. Costs that keep rising due to the high transmission of the Omicron variant. To date, there are hardly any detailed figures on the actual costs for municipalities. But Suzhou reported it already had to spend ¥120 million (€17 million) in February to fight an outbreak that started on February 13 – on protective equipment, PCR tests, infrastructure and medical care. And this had been just a small outbreak. One can only imagine how much money Shanghai currently has to cough up.
Aid measures for the local economy also cost money: The governments of Shenzhen and Dongguan lowered fees and taxes in March to ease the burden on businesses hit by the pandemic. Dongguan announced it would provide ¥1,000 to each household in outbreak-affected areas.
Whenever German chancellors traveled to China, they always carried the wishful thinking of change through trade in their luggage. The logic behind it: Through intensified business relations between China and the West, the People’s Republic would gradually become more liberal, perhaps even democratic someday.
China would automatically join the winning system of liberal democracies and a rules-based world order after the economic liberalization under Deng Xiaoping and its unprecedented economic rise, it was believed.
And indeed, 20 years after China’s accession to the World Trade Organization, the principle of change through trade has come to fruition. But not in the way we had anticipated, but the other way around. Through trade with China, we Germans in particular have also begun to change.
We have bitterly awoken from our beautiful dream. The dependencies of our supply chains and the greed for new growth markets have maneuvered us into a situation in which we now adapt our behavior to Chinese sensitivities. Our dependencies on the Chinese market are now so great that Beijing is using them against us in a “divide et impera” process – divide and conquer. We must finally admit to ourselves and discuss the fact that we are now behaving in this way to avoid Chinese punishment.
We exercise caution whenever we post China-related comments on social media. Corporate bosses bite their tongues to avoid almost any public criticism of China. And even our government is extremely careful not to give Hong Kong human rights activists, exiled dissidents, or even the Dalai Lama too much of a stage, if any. We tolerate the fact that Western online platforms are blocked in China, while China’s propaganda machine here uses Twitter and the like to sway public opinion.
The confidence of the West in its own strength, which apparently grew immeasurably after the Cold War, seems to have blinded many. However, the fact that the People’s Republic has other things in mind than just buying Western goods and accepting Western values apparently did not occur to us. Since joining the WTO, China has perfectly managed to instrumentalize it for its benefit.
The Chinese dream, which President Xi Jinping has formulated as a vision, fuels pride in what has been, but also aspiration to the top. This is not inherently wrong. As the West, however, we must be clear that this Chinese dream is based on the rise of a collectivity that is founded on a different system of values instead of promoting individual freedom and personal development.
Could we have known on what foundation the Chinese dream would grow? It seems that omens such as Document No. 9, which lead to a seven-year prison sentence for journalist Gao Yu’s for publishing it, have been forgotten. Democracy and journalism on the Western model, a civil society, universal values such as human rights, the rule of law or democracy were just as clearly rejected in Document No. 9 as an economic system more characterized by private enterprise than socialism. A look at the Chinese constitution (Article 7), which states the primacy of the state economy, would also have been helpful.
Yes, we could have and should have known all this. We could have put more pressure on China to comply with a global framework of rules, instead of hoping for change through trade in the wake of growing interdependence. Without Western investment, China was and is still unable to deliver on the promise of bringing moderate prosperity to its vast population.
Instead, Western companies have accepted decades of access barriers to the Chinese market through joint venture requirements, forced knowledge transfers, or excluded industries, while Chinese companies have been allowed to acquire port facilities and power grids in Europe, or build highways and other infrastructure.
The hope that China would join the Government Procurement Agreement (GPA) has not yet been fulfilled, even after 20 years of WTO membership. The de facto impossibility of winning important tenders in China as a foreign company has been ignored for too long. It is only in the last few years that reciprocity seems to be part of our diction.
Too late. In the meantime, mega-corporations have emerged in China that have become powerful (not only, but also) through the transfer of foreign expertise and enjoy competitive advantages far beyond the Chinese market thanks to government support.
During my time at the European Chamber of Commerce, I have been criticized more than once for the use of the term reciprocity. Today it is clear that it is the right, rules-based foundation for peaceful coexistence and common development. Solving global problems also works in cooperation with China.
No player – not even the West, of course – should be allowed to cherry-pick regulations that promise unilateral advantages. But that is precisely what we have allowed China to do for decades. In our democratically constituted societies, we must therefore define what price we are willing to pay for growth and prosperity and draw appropriate lines. The war in Ukraine gives us a prime example of why we need and must assert such clear boundaries.
Stefan Sack, 54, used to work as a management consultant at McKinsey before moving to China in 2005. There, he held numerous senior positions at international companies. Between 2013 and 2016, he was Vice President of the European Chamber of Commerce in Shanghai. Sack has lived in Hamburg since the end of last year.
Chengdu is different from most Chinese megacities. The capital of Sichuan Province is a kind of alternative center for creative minds, as far as a dictatorship even allows alternatives. And there is a lot to see here, too. The Anshun Bridge over the Jin River, illuminated at night, is an absolute eye-catcher. Photo: Dmitry Rukhlenko
