Xi Jinping’s iron commitment to zero-covid has left China’s economy in a jam. Can it get unstuck?
Save time by listening to our audio articles as you multitaskSimilar perils face anyone in China bold enough to take a holiday. As many as 150,000 tourists have been stranded on the resort island of Hainan, where a covid outbreak has infected over 13,000 people this month. Those hoping to leave have faced onerous testing requirements and widespread flight cancellations. Videos circulating online show families sleeping on the floor of an airport.
The most profound effects are not always the most obvious. Hainan, for example, accounts for only 5% of China’s tourism revenues, according to Tao Chuan and Shao Xiang of Soochow Securities, a broker. Tourism as a whole accounts for only 4% of China’s. Lockdowns elsewhere in the country have been relatively short in recent weeks. Despite great alarm about disrupted global supply chains, China’s exports have continued to grow strongly.
To cap it all, people who buy a flat in advance can no longer be sure it will actually be built. Many distressed developers lack the cash required to complete construction and can no longer find anyone to lend it to them. That has contributed to long delays in finishing pre-sold properties, prompting a growing number of buyers to threaten to stop repaying their mortgages.
If monetary policy is losing its bite, the onus falls more firmly on fiscal policy to rescue China’s economy. Investment in infrastructure is already growing quickly. But the central government has yet to step in decisively to revive the property market. It has told China Bond Issuance, a state-owned credit insurer, to underwrite bond sales by a handful of private property developers, including a unit of Longfor Group. There is also talk of a 300bn-yuan rescue fund.
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