Tang Bei is associate professor of International Relations and Director of the Center for Global Governance Studies at the School of International Relations and Public Affairs at Shanghai International Studies University. She is also a China Forum expert.
China's approach to the pandemic took an "adventurous leap" at the end of 2022 when it lifted most of the COVID-19 restrictions and the focus shifted to the prevention of serious sickness and death. The capacity of the Omicron variant to spread quickly meant that even though China had raised the number of ICU beds by 140% and equipped medical teams over the past three years, the country's healthcare system still came under great strain. In rural places where the healthcare system is significantly poorer, this was particularly the case.
Despite widespread concerns, Chinese society has mostly stayed stable during this transitional time. Following the adoption of the "10 new measures", the catering and tourism industries quickly recovered during the Chinese New Year. Pictures of large family gatherings also quickly took over social media, and many people started making plans to travel abroad once more. The majority of Chinese people have resumed their normal lifestyles, with the exception of continuing the practice of wearing masks when going out.
Indeed, China has repeatedly demonstrated its resilience to shocks. In 2020, China was the first to suffer from the pandemic, but also the first to restore normality and achieve economic recovery. Looking further back, China's share of world exports has increased despite efforts by the Trump administration to stifle it through trade restrictions.
It is not surprising to learn that Chinese leadership proposed the idea of "prioritising stability and creating progress in the midst of stability" (wenzi dangtou, wenzhong qiujin) during the Central Economic Work Conference held at the end of last year in preparation for China’s economic development in 2023.
The justification is straightforward: in a chaotic world with growing geo-economic divisions, whoever can offer stability is most likely to draw resources and talent and establish themselves as nodes in the global network of production and interaction. This decision is extremely logical for China.
Worsening global trends impact China
The external environment has become less favourable for China's development. On the one hand, the global economy is going through a challenging time. According to the IMF, global inflation will peak in 2023 amid weak growth. The future of the Ukraine conflict remains unclear, which might make world food and oil supplies even more scarce. Meanwhile, the United States is still making greater attempts to "strangle" China in the high-tech industry and to remove it from the global supply chain.
The worsening Sino-US relationship has caused broader reverberations. Consider the ties between China and the UK. Then-prime minister David Cameron called for a "golden age" in Sino-UK relations in 2015 and led the charge for the UK to join the Chinese-led Asian Infrastructure Investment Bank.
The two nations' collaboration in trade, finance, research, technology, and intercultural exchanges had reached new heights.
However, since 2019, the UK's China policy has prioritised ideological and national security over economic and strategic interests. According to China, the UK's meddling in Hong Kong, disapproval of Huawei's technology, and pressure on China over human rights issues are more motivated by an unfounded fear of China than by legitimate national interests.
“Putting our own needs first and doing our best.” (zuohao ziji de shi.) This phrase reflects a significant change in perspective. China has reaped significant benefits from active involvement in economic globalisation ever since its reform and opening-up. Globalisation still exists today, although disruptions have grown, at least temporarily. Major nations are now paying more attention to supply chain security as a result of the epidemic and the conflict in Ukraine; economic efficiency is no longer the sole factor to be taken into account.
China's political system and economic foundation give it the capacity to remain stable
First and foremost, China has a stable political system and distinct development objectives. The government is devoted to modernisation and to raising people's standards of living. Long-term policy planning is a strength of the Chinese government, as is the capacity to control the pace of reform and advance gradually toward its objectives without inciting violent confrontations in society.
Second, it places value on the growth of the real economy and has a manufacturing system that is reasonably well-established. Following the COVID-19 breakout, the Chinese government has given even higher priority to improving the supply chain and filling gaps.
Third, China's enormous population meams it has a sizeable market. In fact, since 2016, local revenues for international businesses in China have increased and surpassed exports. This helps to explain why China still appeals to global investors even after the United States started a trade war with China. The amount of money saved by Chinese households increased by about 26 trillion yuan in 2022. Consumption and investment will pick up steam as the pandemic eases and stimulus initiatives are implemented.
The decoupling approach will not be simple to implement for as long as China accomplishes its objective of stable development. China still has advantages over Mexico, Vietnam, and India, which are the primary alternatives for manufacturing locations, in terms of a skilled labour force, infrastructure, and business environment.
Additionally, China can broaden its advantages by lifting restrictions on foreign investment and joining international trade and economic agreements like the Digital Economic Partnership Agreement (DEPA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This means that over time, those that favour the path of decoupling will have to pay a higher price, defeating their original intention of retaining power.
Having said that, China must increase public confidence in itself by demonstrating its ability to be stable. This calls for ongoing work to make its policy consistent and predictable and to prevent significant risks.
To achieve uniformity in policy at home, rule by law will be essential. Lockdowns will no longer be the main response to COVID-19 now that China has decided to manage it with measures against Class-B infectious diseases under the Law on the Prevention and Treatment of Infectious Diseases.
Legal and institutional measures will also be taken to protect China's stance of support for the private economy, the nationwide treatment of foreign-funded businesses, and greater liberalisation of the service sector.
Risks must be managed within specific bounds though they cannot be completely predicted or avoided. Particular focus has been placed on the risks associated with the housing and financial markets, as well as the problem of local government debt. Making advance preparations and remaining watchful is crucial for China. Risk management might even occasionally present chances to advance domestic reforms.
It is important not to undervalue the global challenges. Due to the need for stability and ongoing development, China must base its foreign policy on practical national interests, including maintaining food and energy security and fostering an environment that is conducive to domestic development. China's diplomacy will continue to focus on fostering cordial ties and reducing uncertainty in the global order.
The main topic of discussion remains Sino-American ties. Positively, there is still opportunity for collaboration in areas such crisis management, economic and trade cooperation, and global governance even though the US strategy frames its strategy towards China as one of competition. 2023 may see a shift towards some cooperation between the two countries as the US midterm elections and China's 20th National Congress of the CPC have come to a close. A reasonable expectation for the bilateral partnership should be to establish some mechanisms for dialogue.
Conclusion
Although the twin storms of the pandemic and counter-globalisation have not totally abated, the future sea appears to be getting a lot calmer. The hull of the enormous Chinese ship is still in decent shape; which is very good news. When the ship’s speed slows, however, the captain must maintain the crew's confidence and be vigilant for any risky undercurrents.
(Originally published on UKNCC on Feb. 17, 2023.)