In the first two years of the global pandemic, China’s model of lockdowns, mass testing and algorithmically-driven quarantine provided an alternative path for controlling Covid that effectively restricted the virus’s spread. Yet last week’s protests across several Chinese cities have shown the limits of the model, as the economy weakens and anger at the government’s restrictive policies boils over. 

A root problem in current policy making is that decisions are increasingly made with scant regard to reality on the ground. In particular, the government has ignored the importance of consumption to growth and especially employment, the limited capacity of local residential committees to impose Covid-related rules, and the great potential of global pharmaceutical companies to help China with their proven vaccines. Shifting policies — quickly — to take into account these realities may help the government weather this legitimacy crisis before it deepens beyond its control.

In the run up to the 20th Party Congress in October, Beijing continued to insist on a low tolerance for the spread of Covid. Although its policies have been mostly successful in controlling the disease, they have come with steep economic costs. Real estate sales and investment have been flat or negative in the first three quarters of the year. Retail sales, especially in the labor-intensive restaurants and leisure segments, have seen multiple quarters of negative growth when inflation is taken into account.

The government needs a clear path out of the downward spiral in the coming months, or it will face even greater popular frustration. 

Fiscal income, meanwhile, has declined by 8 percent in the first three quarters of 2022 while land sales revenue, which local governments rely on to fund their discretionary spending, has plummeted by a whopping 28 percent. To be sure, the latter’s collapse is linked to the draconian deleveraging policy unveiled in 2020. Still, Covid policies have hollowed out the service sector and reduced the pay of millions who work for local governments in China. This has caused frustration particularly the many young people working in service companies, or even junior government positions, who now see no path to a stable middle class life. It is not, then, surprising that real estate sales remain weak. As long as tight lockdown policies continue in some form, the unemployment-reduced spending doom loop will continue. The government needs a clear path out of the downward spiral in the coming months, or it will face even greater popular frustration. 

Throughout the pandemic, Beijing has leaned on grassroots community workers to carry out neighborhood lockdowns, testing and even social services delivery. Recent events have shown that the relentless extra burdens on these residential committees might have pushed them to the limit. The immediate cause of the recent unrest stemmed from rumors that a fire at an apartment building in Urumqi, in the tense region of Xinjiang, had killed ten or more residents because the residential committee there had locked up part of the building, preventing residents from escaping. Whether this rumor is true or not, the internet has been awash with footage of draconian measures taken elsewhere to prevent residents from leaving their homes, including the bolting of front doors from the outside and the installation of electronic sensors that can detect doors opening. Ironically, these sorts of measures came about because of new regulations aimed at reducing Covid restrictions. The “twenty measures”, issued in early November, actually reduced the number of days of mandatory offsite quarantine from seven to five days, but replaced these two days with three days of mandatory in-home quarantine.

Here is a prime example of where policy makers in Beijing have miscalculated due to over-estimating grass-roots governing capacity. Although fewer days of offsite quarantine means less time away from home for those who have had close contact with infected people, this has led to a greater burden on the already stretched residential committees, which have been ordered to enforce in-home quarantine. These committees tend to be composed of a dozen or two lowly-paid workers, many of them retirees, who already had to monitor all the comings and goings in neighborhoods with thousands of residents, and to conduct frequent Covid testing. Now the central government has demanded that they monitor and police individual households where members have been in close contact with Covid patients. They have simply lacked the capacity in many cases and instead have opted to lock down entire buildings or even whole neighborhoods. This may have been the source of much popular anger in recent days. Recognizing the limits of neighborhood committees may result in better policy implementation and less popular backlash.

In this hour of need, the Chinese government should put aside its protectionist industrial policy bent and import Western vaccines and medicines as needed to maximize health outcomes for Chinese citizens.

Finally, although the Chinese government has mobilized domestic pharmaceutical firms to produce medicines and supplies needed for the pandemic, it has mainly relied on lockdown, mass testing, and quarantine to control Covid. With economic needs increasing and popular demand for the end of “zero-Covid” policies rising fast, the government needs to shift gears to focus on opening up and using all tools available to minimize the health consequences of a Covid spike. So far, however, China has refused to import most Covid-related medicines. The global pharmaceutical industry, which has honed its ability to rapidly develop and mass produce vaccines over the past three years, could yet provide a major supplemental source of vaccines for China within a short time. For patients who get infected, Western medicines such as Paxlovid can add to China’s medical arsenal as the number of cases spike. In this hour of need, the Chinese government should put aside its protectionist industrial policy bent and import Western vaccines and medicines as needed to maximize health outcomes for Chinese citizens.

Despite the protests, the vast majority of Chinese still look to the central government for guidance and for policies that improve their lives. The Chinese government can still make policies in a way that fulfills that expectation — but it will need to change course fast.

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