China: Post zero Covid | The Financial Express

China: Post zero Covid

A vulnerable population, unvaccinated elders, ineffective vaccines and a poor health care system will ensure that the long-time relationship between China and Covid will be tumultuous.

covid cases in china
As Omicron breached Zero Covid walls, the macro economy went into a tailspin. (Photo source: Reuters)

By Lt Gen P R Shankar (R)

It is now beyond doubt that the pressure of  public protests and dissent forced China to dump Zero Covid without an exit strategy. China has been swamped by Covid since then. Lack of medicines, overwhelmed hospitals, ambulance services and funeral parlours, and acute blood shortages dot the swamp. There are optimistic reports that the wave will peak soon, herd immunity will set in shortly and China will rebound to business as usual. That is pure fantasy being spun by Chinese propaganda. While the initial wave has peaked in cities like Beijing and Shanghai, the pandemic has stepped into rural China where health facilities are even worse. The estimates are that infections will  peak in a couple of months. Beyond that Covid will endure as it has done everywhere else. A vulnerable population, unvaccinated elders, ineffective vaccines and a poor health care system will ensure that the long-time relationship between China and Covid will be tumultuous.

Against this backdrop, there are reports that China will shrug off the pandemic to resume its growth. Others portend a decline in China. Most of these reports do not give a holistic picture. It is therefore necessary to examine  what China will look like in its Post Zero Covid period.


An abrupt U turn on the Zero Covid policy, pacified angry protesters who took to the streets in Nov 22. However the scale of the health crisis gripping China has thrown up hitherto unimaginable questions on social media. Is Omicron really less severe, as propagated by Chinese propaganda when people are dying and hospitals are overwhelmed? Why were adequate preparations  not made in the three years since coronavirus erupted? Who is responsible and should be blamed for the explosion of cases and deaths? There is disquiet and dissent. Public trust in the Communist Party is on the line. China’s governance system relies on public trust and societal participation which is under the hammer. Political costs of abandoning Zero Covid without an exit strategy are presently unclear, but will manifest with time. As per SCMP some supporters are indirectly questioning Party decisions. Some feel that dropping  “Zero Covid” abruptly has empowered  detractors at home and in the West. The  current crisis could shake the political foundations of China with implications far beyond battling the virusalone. There is an opinion that Chinese society could be divided into antagonistic groups which are  equally powerless and equally helpless. The extent of this ominous subsurface friction between the government and disenfranchised citizens is unknown.  One expects all opposition to be crushed. However, increasing public resentment kept under the boot, turning  into widespread noncompliance is a Chinese nightmare. The Covid experience will have political implications that impact China beyond the obvious. An early indication is that “Common Prosperity”, the flagship program of Xi Jinping, has been missing from the news since mid-November 22. Further, there are nascent political moves to reaccommodate private enterprises once again. Are there fissures in the Party monolith?

“Run” Culture

“Run” culture which emerged in 2018has gathered steam now.“Run” culture, is the flight of high net individuals away to escape China’s control and increasing uncertainty for the freedoms and opportunity in free societies overseas. Invariably it takes the form of setting up business offices or sending children to study abroad.It is also an avenue  for China’s middle class to move their money outside and invest in destinations which are more profitable than sustaining losses in property slump at home.  China’s political environment and policies against the rich have fuelled this trend in the current environment. A spike in this trend has been reported from almost all over the world. The other way to look at it is that rats are deserting a sinking ship.


As Omicron breached Zero Covid walls, the macro economy went into a tailspin. In the past three years numerous small businesses have closed, tourism and the services sector has been severely disrupted and unemployment  has increased. Tax and land sale revenue of local governments dipped while pandemic-related healthcare expenditure grew to unsustainable levels. Overall, the Chinese economy is expected to remain flat. However one has to look beyond this. In  2021 the world was captive to Chinese manufacturing and supply lines.  International trepidation increased due to over dependence on a Zero Covid China,  which was  asserting to establish a Sino centric vision world order. Decoupling and relocating started taking shape when supply chains  disrupted due to strict Zero Covid policies. The gruelling Shanghai lockdown from Feb to Aug 22  undermined China’s international reputation for predictability and efficiency. Afterall, Shanghai was the world’s second largest portland home to Apple,  General Motors , Volkswagen and Tesla. Decouplingis now well underway with Apple leading relocation out of China. Others like Dell are following suit. Even domestic firms are shedding their tag of being Chinese to stay in business. As decoupling widens, there are bound to be permanent and long lasting job losses and salary cuts.

Real estate and related industries are at the heart of the Chinese economy with a 30% share. China went through one of the largest and most sustained surges in property prices in history. Households , businesses, banks and government entities rode on this bubble to prosper.However the virtual collapse of the debt ridden property sector has led to a sharp decline in prices. China witnessed unprecedented street protests nation-wide refusal to pay mortgage instalments. The average Chinese person who has  invested his life savings in a flat for personal financial security,expecting  growth in valuation, has lost out big time. Despite this, property prices relative to household incomes are still two to four times in China as compared to the rest of the world. The current bubble is unsustainable. The investment of the common man is still at risk. China cannot allow the property bubble to expand, due to long term costs. Contraction in the property market will hit the macroeconomy and the individual harder. China cannot deflate the sector since it is  politically unacceptable. The China growth story, hinging on property, is having a severe heart attack in this conundrum.

Revival of the Chinese economy is presaged  by switching from investment to a consumption driven model. However China enters the post Zero Covid phase in the face of decoupling, unemployment, property losses , individual debt, investment hesitancy and weak confidence. Such conditions cannot enhance consumption. Economic stagnation is inevitable. Economic prosperity and improving living standards, from which the Communist Party has long drawn its legitimacy, is on the line.


China’s population is declining officially. Its low fertility rate cannot be reversed despite liberal cash incentives  to couples to have more children, Simultaneously China is also ageing rapidly. Everyone knows that China is attempting to get rich before it gets old. It is also well known that China does not have adequate social security schemes,  health infrastructure or pension funds to take care of its ageing population. Overall, as the Chinese population ages and contracts,  its economy will get capped over the long term.  However the bigger issue is the short term effect. It is well known that China focussed on its youth in its vaccination drive, leaving the elderly vulnerable. The sudden lifting of Zero Covid has affected elderly unvaccinated population the most. From reports, it appears that maximum deaths due to Covid in China presently are of the elderly. This will continue into the future through 2023 at least. Disproportionate deaths of the elderly due to Covid poses a question. Has China deliberately allowed this to happen to solve its demographic problem of an ageing society?  Sooner or later someone is bound to ask this question internally. If it gathers steam, public discontent in the communist regime will only increase. The road ahead is definitely not smooth.


Whenever China is beset with internal problems it becomes externally aggressive. In 1962, it invaded India despite the great famine of Mao’s disastrous  Great Leap Forward. Most wars undertaken by China are part of a well-established pattern – internal problems being externalised militarily through conflicts. Even in early 2020, China was assertive in the South China Sea by sinking a Vietnamese fishing vessel, usurping Hong Kong and altering  the status quo unilaterally at the LAC with India by force. This was when Covid initially struck at Wuhan, the Chinese economy was in the dumps and there was geopolitical pressure on China. Continuing in the same vein, despite the current head winds of Covid, economic problems and social tensions, China has been militarily aggressive. It made a blatant attempt at altering the status quo on the LAC with India at Yangtse early in Dec. On 25-26 Dec, China carried out a massive air violation of Taiwan’s air defence identification zone with 71 PLA aircraft.  On 29 Dec a PLA fighter aircraft carried out unsafe manoeuvres close to a US reconnaissance aircraft. A report of 12 Jan 2023, indicates that China sent its largest coastguard vessels to patrol Indonesia’s Natuna Islands in  bid to “send a signal” to the region. Its  assertive activities in the South China Sea are rising again. Every day one reads reports of PLA being equipped with a new military capability as part of its modernisation program as outlined by Xi Jinping during the 20 Party Congress. The Chinese military is bristling for action.


A holistic appraisal suggests that the comprehensive national power of China will decline due to the effects of the current covid wave conflated with economic stagnation, political and demographic issues. This decline will last well into 2023-24. There are indications that China is  externalising the situation militarily.  As the decline extends into the foreseeable future, muscle flexing by China will increase against its main targets – Taiwan and India and might result in a premature military adventure if it perceives an opportunity. Hence there is a serious case for greater strategic military cooperation between Taiwan and Indiato forestall such a situation. Such cooperation has to leverage and build on the QUAD, Indo- US strategic partnership and the US-Taiwan Relations Act. A new security initiative is needed to curb Chinese military adventurism before it is too late. 

The author is PVSM, AVSM, VSM, and a retired Director General of Artillery. He is currently a Professor in the Aerospace Department of IIT Madras. He writes extensively on defence and strategic affairs @

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First published on: 27-01-2023 at 11:23 IST