Mixed messages on COVID and economy from top Chinese leaders fuel split speculation

A team of health workers and volunteers in personal protective equipment (PPE) test each other before testing residents of a neighborhood where a suspected outbreak of COVID-19 cases occurred in Shanghai on May 9, 2022 (Qilai Shen/Bloomberg)

Premier Li Keqiang’s warning about China’s “complicated and serious” jobs situation on Saturday was particularly dire, even for someone who has been ringing the alarm bells for months. But that was also another notable reason: he didn’t mention President Xi Jinping’s COVID Zero strategy.

Days earlier, the Politburo Standing Committee – on which both Xi and Li sit – warned Chinese citizens not to question the COVID control policies that have locked down cities across the country, including Shanghai. . This statement, on the other hand, contained no mention of the economy.

In addition to confusing local officials who must find a way to stamp out COVID and grow the economy, mixed messages from China’s most powerful leaders raise questions about whether there is a split at the top over the best way out of the pandemic.

Any space between Xi and Li is being scrutinized for signs of power struggles taking place within China’s opaque government. Once seen as rivals for the top job, the pair continue to be seen as standard-bearers for distinct tensions in policymaking, with Xi representing the more ideological wing and Li associated with a tradition. more technocratic.

“It’s probably an overstatement to say that Xi and Li personally disagree, but their statements represent differing views within the system on COVID and its impact,” said Richard McGregor, author of “The Party: The Secret. World of China’s”. Communist leaders.” “China is reaching the point where the need for a real debate about whether the price to pay for further lockdowns is worth the economic damage.”

As much of the world seeks to return to normal as vaccines proliferate and virus deaths recede, China is pursuing COVID Zero, increasingly equating dissent against politics with subversion of Xi. Beijing has trumpeted the government’s success in stopping outbreaks before they spiral out of control as evidence of the superiority of the Chinese model of governance over American or European-style democracy.

Still, the lockdown-dependent strategy has led to sustained social tensions in the country’s biggest city, Shanghai, where many of its 25 million people have been under restrictions for more than a month. Curbs in the capital Beijing have become gradually stricter in recent days.

While the Standing Committee last week made no mention of the balance between COVID controls and economic growth, Li’s statement focused on unemployment, which soared to 5.8% in March. , the highest since May 2020. “Stabilising employment is important for people’s livelihoods,” Li said, adding that doing so was “also a key support for the economy to operate within a reasonable range.” “.

Unemployment is a topic Li raises regularly, including in remarks to the National People’s Congress in March when he announced he would not return as prime minister next year after a party reshuffle that will likely extend the reign of Xi. China’s economy will see 16 million new urban job seekers in 2022, and securing their jobs will require greater policy support, Li said.

Andy Chen, senior analyst at Beijing-based consultancy Trivium China, said the country’s leaders did not see policy priorities as being at odds. Li, as prime minister and head of government, is supposed to focus on the economy, unlike Xi, who leads the party and is therefore its political head.

“They regard containing COVID outbreaks as the prerequisite and basis for maintaining strong economic momentum,” Chen said. “So emphasizing job security doesn’t mean controlling the pandemic is a lower priority. It’s still the No. 1 priority.”

Whether senior Chinese leaders see their instructions as contradictory creates dilemmas for local officials, who might view COVID controls as literal obstacles to the smooth functioning of supply chains. After the Standing Committee’s latest executive order, “local governments lack real incentive to dismantle roadblocks” set up on highways to prevent the spread of COVID, Trivium said in its newsletter.

Besides holding different portfolios, Xi and Li come from different corners of the party elite. The president is the “princely” son of a revolutionary while the prime minister is an economist by training and considered a protege of former president Hu Jintao. Xi was chosen over Li in 2007 to succeed Hu. Potential successors for Li’s job include Li Qiang, a former Xi secretary who is now in charge of Shanghai’s lockdown effort.

Li Keqiang “has always represented a more technocratic policy-making strain in the system that today is very frustrated with how the commitment to COVID Zero has played out,” said Jordan Schneider, principal analyst at Rhodium. Group. “Li in his statement was trying to make room for executives to consider economic considerations, as well as public health.”

Schneider said there has been a pattern of reactive messaging in recent months in which technocratic officials have been called upon to make statements that reassure markets only that politicians fall short of expectations. “What can happen is less of a disagreement between the two and more of messages of dovish politics not being followed by dovish politics,” he said.

A similar split emerged last year after efforts by local officials to meet Xi’s ambitious carbon targets were blamed for power shortages. Li later indicated that the government would rethink the pace of China’s energy transition, slamming a “one-size-fits-all” approach to stopping energy-intensive projects or “campaign-style” carbon reduction.

McGregor, the author of “The Party” who is now senior fellow for East Asia at Sydney’s Lowy Institute, said Xi was trying to dictate the outcome of the COVID policy debate by suppressing one side of the argument. He suggested watching to see if Li becomes more vocal on political issues as he prepares to step down as premier.

“The key question is whether Li persists in speaking publicly about the economy,” McGregor said. “Then we might have the real ingredients for a split.”

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