How the pandemic can affect Xi Jinping’s “China dream” | Analysis – analysis
The severe mismanagement of the coronavirus pandemic (Covid-19) by the Chinese government and the tragic loss of life have angered citizens. This was evident from the riots that took place at the border checkpoint between Hubei and Jiangxi provinces on March 28. The pandemic has also severely affected the nation’s economy, virtually halting its growth for the past three months and leaving millions without jobs. The service sector is losing approximately $ 144 billion each week. Unemployment has risen to more than 6%. Financial services have evaluated a 30% contraction in the Chinese economy. The economic recovery has been slow, which has led Chinese entrepreneurs like Jack Ma, founder of the Alibaba Group, and Liu Chuanzhi, founder of Lenovo, to sign a nine-point letter to President Xi Jinping to revive demands for comprehensive reforms. .
Economic losses have hurt almost all sectors. Bloomberg reported a 9.9% contraction in central and local government revenues in the first two months of 2020, calling it the “deepest drop since February 2009”. The report added: “Tax revenues decreased more than 11%, with declines in value added taxes, corporate income taxes, and car purchase taxes.” However, the increase in disbursements in medical care and social security “kept the decrease to 2.9% from a year ago.” Twenty-two provinces, regions and municipalities had already lowered their growth targets for 2020, and 11 regions officially admitted that they did not meet their 2019 GDP targets. A joint survey by the Guanghua School of Management at Peking University and the China’s largest hiring, Zhaopin, revealed that job vacancies in the country during the first two months of 2020 fell more than 30%. The most affected are the media, entertainment, sports and services sectors, followed by the information technology, telecommunications and Internet sectors, which registered a drop of up to 40% in recruitment. Smaller companies suffered more.
China’s leaders have struggled to revive the economy also because, particularly President Xi, they consider it important at the national and geopolitical level to achieve the “China Dream” by 2021 and keep the country on track to become “a great world power with pioneering global influence “by 2049. The latter involves acquiring the ability to rival the United States (US) and influence and create global organizations. Failure to meet these objectives would adversely affect their legitimacy. However, despite their efforts, the economic recovery is slow.
Starting on February 3, Xi called on local officials to “prevent the economy from falling out of a reasonable range,” emphasizing the importance of China’s role in global trade and the need to “stabilize China’s participation in the international market”. He also highlighted the need to promote international cooperation and maximize the country’s role as a “great responsible power”. Meanwhile, Chinese Prime Minister Li Keqiang tried to stabilize foreign investment and attract investments of more than $ 1 billion in the manufacturing and high-tech sectors.
Other steps to revive economic activity include providing medium-term financing to banks and reducing the interest rate. More than 300 Chinese companies seek bank loans, totaling at least $ 8.2 billion. To encourage the recovery of the service industry, at least 10 governments are giving coupons directly to people. However, the Ministry of Industry and Information Technology said that by March 24, only 71.7% of small and medium-sized companies had resumed operations.
China is taking into account strategic interests. Companies have increased production of medical equipment and supplies to take advantage of global demand. Benefiting from falling oil prices, China bought almost 1.5 million tons of commercial crude, raising its strategic storage of oil to 29.45 million tons.
But China’s growth will depend on the global economy and other countries. The rivalry between the United States and China is about to escalate. As the United States, Europe, and other countries grapple with the pandemic, trade will be limited and low on their priority list. Countries will introspect and reexamine current trade policies, like India, with priority on eliminating dependence on a single source of supply, especially in vital sectors. Given that the possibility of biological warfare is now a reality, a serious complication for China will be its image, suspicions of its role, and whether it shared relevant pandemic data with the world in time. China blocking a discussion of the pandemic at the United Nations Security Council only raised suspicions.
Jayadeva Ranade is a former additional secretary, Cabinet Secretary, Government of India and president of the China Center for Analysis and Strategy.
The opinions expressed are personal.