From Zero-Covid Unraveling to Economic Recovery: What to Watch for in China in 2023

Editor’s note: A version of this story appeared in CNN’s news bulletin Meanwhile in China, a tri-weekly update exploring what you need to know about the country’s rise and its impact on the world. Register here.

hong kong
CNN
—

After a tumultuous end to a momentous and difficult year, China enters 2023 with much uncertainty – and potentially a glimpse of the light at the end of the pandemic tunnel.

The chaos unleashed by leader Xi Jinping’s abrupt and ill-prepared exit from zero-Covid spills over into the new year, as large swaths of the country face an unprecedented surge of Covid.

But the haphazard reopening also offers a ray of hope for many: After three years of stifling Covid restrictions and self-imposed global isolation, life in China may finally return to normal as the nation joins the rest of the world. world to learn to live with the virus.

“We have now entered a new phase of the Covid response where difficult challenges remain,” Xi said in a nationally televised New Year’s address. “Everyone is hanging on with great courage and the light of hope is right in front of us. Let’s go the extra mile to get through this, because perseverance and togetherness mean victory.

Xi had previously staked his political legitimacy on zero-Covid. Now, as his expensive strategy is being dismantled in a sharp reversal following nationwide protests against it, many are questioning his wisdom. The protests, which in some places saw rare demands for Xi and the Communist Party to “resign,” may have ended, but the prevailing sense of frustration has yet to dissipate.

His New Year’s speech comes as China’s lockdown-ridden economy faces more immediate pressure from a spiraling epidemic that has hit factories and businesses, ahead of what will likely be a long and complicated road to recovery. economic recovery.

Its tightly closed borders are gradually opening and Chinese tourists are eager to explore the world again, but some countries appear cautious about receiving them, imposing new requirements for a negative Covid test before travel. And how quickly – or keenly – global visitors will return to China is another question.

Xi, who recently re-emerged on the world stage after securing a third term in power, has signaled he hopes to mend frayed relations with the West, but his nationalist agenda and “unbounded friendship” with Russia risk undermining. complicate things.

As 2023 begins, CNN takes a look at what to watch in China in the coming year.

The most pressing and daunting task facing China in the new year is how to handle the fallout from its botched exit from zero-Covid, amid an epidemic which threatens to kill hundreds of thousands and undermine the credibility of Xi and his Communist Party.

The sudden lifting of restrictions last month led to an explosion of cases, with little preparation in place to deal with the growing number of patients and deaths.

The country’s fragile healthcare system is scrambling to cope: fever and cold medicine are hard to come by, hospitals are overwhelmed, doctors and nurses are stretched to the limit, while crematoriums are struggling to make ends meet. in the face of an influx of bodies.

And experts warn that the worst is yet to come. While some major metropolises like Beijing may have seen the peak of the outbreak, less-developed cities and the vast rural hinterland are still bracing for more infections.

As the Lunar New Year travel rush – China’s most important family reunion festival – begins this week, hundreds of millions of people are expected to return to their hometowns from major cities, bringing the virus in vulnerable rural areas where vaccination rates are lower and medical resources even scarcer.

The outlook is bleak. Some studies estimate the death toll could exceed one million if China fails to roll out boosters and antiviral drugs fast enough.

The government has launched a booster campaign for older people, but many remain reluctant to take it due to concerns about side effects. Tackling vaccine hesitancy will take a lot of time and effort, when the country’s medical staff are already exhausted.

Beijing’s Covid restrictions have put China out of step with the rest of the world. Three years of border closures and curbs have disrupted supply chains, damaged international businesses and hurt trade and investment flows between China and other countries.

As China joins the rest of the world in living with Covid, the implications for the global economy are potentially enormous.

All The resumption of Chinese growth will provide a vital boost to economies that depend on Chinese demand. There will be more international travel and production. But rising demand will also push up energy and commodity prices, putting upward pressure on global inflation.

“In the short term, I think China’s economy is likely to experience chaos rather than progress for one simple reason: China is ill-prepared to deal with Covid,” said Bo Zhuang, senior sovereign analyst at Loomis, Sayles & Company, an investment company. based in Boston.

Capital Economics analysts expect the Chinese economy to contract by 0.8% in the first quarter of 2023, before rebounding in the second quarter.

Other experts also expect the economy to recover after March. In a recent research report, HSBC economists predicted a contraction of 0.5% in the first quarter, but growth of 5% for 2023.

Despite all this uncertainty, Chinese citizens celebrate the partial reopening of the border after the end of quarantine for international arrivals and the resumption of outward journeys.

Although some residents have expressed concern online about the rapid easing of restrictions during the outbreak, many more are eagerly planning overseas trips – travel websites saw massive traffic spikes within minutes after the December 26 announcement.

Several overseas Chinese nationals told CNN they had been unable or unwilling to return home in recent years while the long quarantine was still in place. This stretch signified major life moments missed and passed by: graduations, weddings, childbirths, deaths.

Some countries have offered a warm welcome, with foreign embassies and tourist services displaying invitations to Chinese travelers on Chinese social media sites. But others are more cautious, with many countries imposing new testing requirements on travelers from China and its territories.

Officials in these countries have pointed to the risk of new variants emerging from the outbreak in China – although many health experts have criticized targeted travel restrictions as scientifically ineffective and alarmist, with the risk of further inciting the racism and xenophobia.

As China emerges from its self-imposed isolation, all eyes are on its ability to repair its reputation and relationships that have deteriorated during the pandemic.

China’s ties with the West and many of its neighbors have significantly crumbled due to the origins of the coronavirus, trade, territorial claims, Beijing’s human rights record and its close partnership with Russia despite the devastating war in Ukraine.

The lack of high-level face-to-face diplomacy certainly hasn’t helped, nor has the freezing of in-person exchanges between political advisers, business groups and the general public.

At the G20 and APEC summits, Xi has signaled his willingness to restore relations with the United States and its allies in a series of bilateral meetings.

Lines of communication are open again and more high-level exchanges are underway – with US Secretary of State Antony Blinken, French President Emmanuel Macron, Dutch Prime Minister Mark Rutte and new Italian Prime Minister Giorgia Meloni all of whom are expected to travel to Beijing this year.

But Xi has also made clear his ambition to push back American influence in the region, and there is no illusion that the two global superpowers will be able to resolve their fundamental differences and put aside their escalating rivalry. .

In the new year, tensions could erupt again over Taiwan, the tech lockdown, as well as China’s support for Russia – which Xi stressed during a virtual meeting with Russian President Vladimir Putin on 30 December.

The two leaders expressed a message of unity, with Xi saying the two countries should “strengthen strategic coordination” and “inject more stability into the world”, according to Chinese state media Xinhua.

China is ‘ready to work’ with Russia to ‘oppose hegemonism and power politics’ and oppose unilateralism, protectionism and ‘bullying’, Xi says . Putin, meanwhile, has invited Xi to visit Moscow in the spring of 2023.

Beijing has long refused to condemn Russia’s invasion of Ukraine, or even refer to it as such. Instead, he denounced Western sanctions and amplified Kremlin talking points blaming the United States and NATO for the conflict.

As Russia has suffered humiliating military setbacks in Ukraine in recent months, Chinese state media appear to have scaled back their pro-Russian rhetoric somewhat, while Xi has agreed to oppose the use of nuclear weapons. in Ukraine during meetings with Western leaders.

But few experts believe China will distance itself from Russia, with several telling CNN that the two countries’ mutual trust and geopolitical alignment remain strong, including their shared vision of a “new order.” global”.

“(The war) was a nuisance for China last year and affected China’s interest in Europe,” said Yun Sun, director of the China program at the Washington-based think tank Stimson Center. “But the damage is not great enough for China to abandon Russia.”