Enodo Economics Chief Economist, Diana Choyleva with her thought of the day.
I am sitting in London under lockdown and today I was choosing the design for our Chinese New Year greeting card. And it made me ask myself this question – Is China’s victory over Covid real and does the most gigantic human migration about to ensue over the CNY holidays pose a new Covid threat? Well through draconian lockdowns and Beijing’s ability to marshal its population into compliance, China did snatch pandemic victory from the jaws of Covid defeat. In that sense its victory is real, but Beijing genuinely believes that its ability to contain the pandemic shows yet again that its system works better.
It thought the same after the Global financial Crisis. But in both cases the authorities have failed to acknowledge China’s role in precipitating each crisis, and as a result in the case of GFC Beijing has failed to see how it has come back to bite them and may come back to bite them in the case of Covid too. The Global Financial Crisis pulled the rug from underneath China’s export led growth by resulting in years of weak global growth.
So for China to continue to throw money at wasteful investment as it did post GFC it could only do that with debt escalating at an alarming pace.
With Covid, Xi has been banging the drum abut his and the Party’s win over Covid, so he’s almost box himself into a corner. China only has localized outbreaks of Covid at the moment, but one does wonder whether the most gigantic migration of hundreds of millions of people about to ensue, is such a good idea in the current circumstances. The authorities in Beijing have left it to local governments – as if that worked wonders last time – to deal with the issue. And these local governments have been using monetary incentives to make people stay. The CNY though celebrations and travel are the only time for a lot of migrants that they are able to see their family during the year. So, it is a big deal.
Meanwhile the Chinese vaccine has been much less effective than the Western vaccines and Beijing has responded by attacking and undermining Western vaccines. Again, a gambit in my view, they shouldn’t take at present.
So, keep a keen eye on these CNY celebrations.