China’s history explains its zero COVID strategy – The Australian Financial Review

“ZCS has demonstrated the institutional strength of the ruling Chinese Communist Party and has allowed officials to laud the “triumphant” Chinese model, while abandoning ZCS now could be perceived as a concession that the strategy does not (and never did) work,” according to Nomura economists in Hong Kong, Ting Lu and Jing Wang.

“We believe Beijing would gain more by exercising extra caution in the once-in-a-decade leadership change period.

“We had assigned a small probability to Beijing exiting ZCS at end-March after the Winter Olympics and its National People Congress (NPC) conference – now, we think the likelihood is almost nil.

“Instead, we see a rising probability of Beijing sticking to its ZCS until March 2023, after the upcoming leadership changes are fully completed.”

Many economists believe China will respond to lower economic growth caused by ZCS with government stimulus.

“With private demand anemic, we believe demand-side stimulus on the fiscal front is likely to be more effective and more immediate than monetary easing in offsetting growth headwinds,” says Goldman Sachs economist Hui Shan in Hong Kong.

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“We expect policy-driven public investment to become more visible in or after March this year, when some near-term constraints such as Covid-related restrictions and production cuts prior to and during the Beijing Winter Olympics are set to ease.”

Zhang Ning, senior China economist at UBS told the UBS Greater China Conference this week that the ZCS had proved extremely effective.

“The zero COVID strategy is the most efficient way for China to have the economy operating as normal as possible at a manageable cost, given the less robust medical resources in China than other developing markets,” he said.

“If omicron spreads more broadly, in China, we believe the very straightforward response from the government will be more lockdowns in most cities, and more restrictions on travelling, and even some suspension for offline activities.”

China to displace America: Dalio

The ZCS can be viewed as an integral feature of President Xi’s common prosperity philosophy, which has parallels with the social and economic policies of previous periods in Chinese history.

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When billionaire hedge fund manager Ray Dalio appeared at the UBS Greater China Conference this week he put up a chart showing the rises and declines in the power of empires since 1500.

The chart showed that, based on 21 indicators of power developed by Bridgewater Associates, China is on a rapid upward trajectory and will soon challenge the United States as the most powerful “empire” in the world.

One of the more interesting aspects of Dalio’s chart, which comes from his book Principles for Dealing with the Changing World Order, was China’s position as the world’s most powerful empire between 1500 and 1600.

This peak in Chinese global power occurred during the Ming dynasty (1368 to 1644), which has been described by Harvard University historians Edward Reischauer and John Fairbank as “one of the great eras of orderly government and social stability in human history”.

Dalio, who confirmed his support for Xi’s common prosperity philosophy, says, “one of the great things about Chinese leaders is that they study history and the patterns of history, and they particularly study their dynasties.”

He says meritocracy was probably invented by Confucius and this is a powerful factor in China’s success including rising living standards and the distribution of wealth.

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There are many similarities between the state and society under the Ming and life in China in 2022 under President Xi.

During the Ming dynasty and the subsequent Ch’ing dynasty, China had complete confidence in its cultural superiority and held a contempt for the outside world, according to Reischauer and Fairbank.

They argued that underlying this devotion to the Chinese way of life in the Ming dynasty was one primary political fact, namely that the whole Middle Kingdom remained an administrative unit under a central government.

“No doubt this political achievement of the Chinese must be attributed to the whole past development of their institutions, but one feature of this development stands out: the stress on rational social and political order, which kept religion and commerce, learning and technology, city and countryside, all subordinate to the imperial government,” Reischauer and Fairbank said in East Asia, The Great Tradition.

There is much scepticism outside of China about its claim that only four people have died in China from COVID since April 2020.

But there is no doubt the ZCS has ensured China’s pre-eminent position as showing the strongest economic resilience through the pandemic.

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