The Great Game #1 - China Re-opening?

With his grip on the Chinese power apparatus firmly secured, will Xi now allow the beleaguered Chinese out of their apartments as he travels abroad?

Welcome to a brand new series - ‘the Great Game’. In this space, you will find geopolitical analysis to complement our financial analysis in ‘Stenos Signals’. We kick off with a closer look at Xi’s China and their fierce lockdown regime.

The Great Helmsman 

“The Great Helmsman”. Just take that phrase in for a second. Imagine a sturdy, unwavering sailorman steering his ship through the storm with care, determination and almost divine foresight of the treacherous waters. Such was the imagery bestowed upon Mao Zedong after the almost Biblical “Long March” exodus of the Communists after they were all but destroyed by Chiang and his Nationalists in 1934.

I really hope Xi will take the wonderful Helmsman symbolism upon him as well. He has done his part in securing his historical position as the strongest leader of China since the mythical Mao – most recently by purging all internal opponents and installing a completely loyal standing committee. And to top it off, Xi took his new cadre of yes-men to the cradle of Mao’s Long March – the mountainous city of Yan’an. The symbolism couldn’t be clearer – Xi is the new Mao. He has taken China through the Covid-19 plague and is now ready to look outwards once again.

Steadying the ship  

The return of China on the global stage was anything but mythical, however: A meeting with Olaf Scholz, the most boring figure in international politics since, well – his predecessor. But it was nonetheless a very significant and noteworthy step for Xi and China as they signaled their re-entrance on the international arena.

The last 6-12 months have seen Xi and his clan focus almost entirely on preparing their big internal power grab at the Party Conference. The incredibly restrictive Covid lockdowns served three purposes – first and foremost, they were essential if Xi was to get anywhere close to his “zero-covid” pledge to his population. Second, they helped reduce economic activity and thus inflation in a very direct and physical manner, and finally, they created a pseudo-martial law situation that prevented demonstrations and unrest before and during the Party Conference. Such was the fear of Xi and his people. Not only of Covid, but of his own people and party members.

Now, Xi has secured his power and seems ready to face outwards. The first step was meeting with Olaf Scholz (and participating in the SCO meeting in Samarkand two months ago). The next step is the G20 summit and perhaps a firmer course towards Russia? That’s something we’ll be monitoring closely.

Now back to the re-opening. When will the Chinese population be allowed to follow their great helmsman abroad? Or just be allowed to leave their apartments? 

Re-charting the course? 

The most important step towards a re-opening, thus far, was taken when China’s National Health Commission on Friday, November 11, published a notice (CHN) that includes the much anticipated 20 measures to further optimize COVID prevention and control work.

The spirit of the notice is reminiscent of many European countries’ first attempts at wide-spread reopening back in 2020: The overarching message from the Chinese leadership it that the existing (zero tolerance) policy have been appropriate and that new ‘adjustments’ should not be seen as a negation of this POV. It follows from the notice that the Chinese government is NOT easing Covid-restrictions, rather they are adjusting policies, based on new available evidence on how to best balance competing interests for public health and prosperity.

In reality, the 20 measures sound remarkably like the prelude to a more widespread reopening ala Europe 2020: making lockdowns more local, lifting certain travel restrictions, bumping up vaccination programs, and targeting efforts to avoid contamination amongst society’s most vulnerable (instead of simply avoiding contamination all together). All the while managing citizens’ expectation that they should brace for a rising number of cases.

Troubled waters ahead

However, as many Europeans will remember – the first lifting of restrictions does not mean that the path to a full reopening is fast nor uncomplicated. Tiers, localized lockdowns and hierarchical reopenings can cause just as much confusion and frustrations as a one-size-fits all zero-tolerance policy. For China, a country where few things matter as much as social stability, it might take a good while to get the pace and balance of the reopening right. 

Talking to our contacts in Shanghai, they too have idle faith in a quick restriction turnaround in a country where the political visions of the party-top oftentimes look vastly different on the ground. One of the major pitfalls is that local governments may be more risk-averse than the central government they answer to. Say a provins has a major explosion of cases - no political action doesn’t look great on governors’ performance review in the highly meritocratic Chinese system. Leaving it up to local governments to decide when to enforce lockdowns, might mean that lockdowns are less frequent nationally but more severe where they are enforced.

So - while I remain confident that China will gradually begin lifting the lockdowns sooner rather than later, I also believe that it will likely happen gradually and locally. We are likely looking at several months of ebb and flow in the severity of restrictions in China before a de facto reopening is likely to stick during Q3-4 2023.