Complacency is always a dangerous mental state, and that has been the situation for many people in China with regard to the pandemic over the past year, due to the success of virus control in the early part of 2020. No more. There have more than 500 cases reported in different parts of the country, in spite of the zero-tolerance policy of the authorities. Now, 500 is not a big number compared to many other places. Many states in the United States are surpassing that number every single day. But there are two reasons why it is important in China. The outbreak has the potential to impact on the perception of the superiority of the system which has allowed most people in China to be pretty blasé about the virus for most of the past 18 months. And then there is the possibility of panic if the numbers should mount. We do not expect them to do so, although the grayness of China at the grassroots level, often in contrast to the absolute sense of control from the center, allows for the possibility of continued virus case number growth. The rigorous control approach is most likely to bring things under control, but the rest of August is going to be an unsettling time, and there will be an economic price to be paid.
The market bloodbath caused by government statements on tech, education and gaming did not abate, and there is a lot of soul searching among companies, investors and the middle class as they consider the implications of all this, for business and for the future of their children. There are several negative trends all mixed up together here which highlight what we already knew—that this is a new era in Chinese history. The era of “reform and opening” is over. The aim now, it would seem, is to create, or cement, a two-tier society. The problem with this plan is the middle class, which does not feel stable in its position in such a two-tier society structure. They are no longer a part of the blue-collar proletariat—they have escaped from that and they don’t want to return. But they will also not become part of the ruling class. The new policies on education and entrepreneurs make that clear. So they are stuck.
All is stable as long as the economy is relatively good, and it is possible it will continue to do well for a long time. Strong central control makes that possible. There is a lot of power in China’s domestic market yet to be developed, but there are also big problems out there. We decline to completely discount the longer-term strengths of diversity, transparency and rule of law, no matter how messy the West may often appear. The pandemic also proves that the unexpected is always a possibility.
Enjoy the weekend ahead.