What does the virus response tell us about China’s economic policy?
The Chinese government’s response to the virus tells us a lot about how economic policy will play out over the coming decade. Local decisions, blocking information flow, have given way to a mass campaign on a national scale. However, this suggests the opposite of effective policymaking – the State Council under Xi Jinping can only react with large policy actions. Otherwise, the country is left on its own. Also, there are early rumors of weakening power under Xi – but nothing proven. What does this mean for economic policy over the next few years?
Weak controls over credit
The government’s inaction at all levels is being blamed on poor decision-making among local officials. This is an easy way to deflect blame for the failure by the central government to act decisively. As the Chinafile website noted, “The silver lining for the Party leadership in this otherwise highly dangerous scenario is that public anger seems to have primarily coalesced around local, rather than central, government and medical activity…The central government benefits from the ability to shift blame to local underlings in times of serious crisis.”
However, this attitude also erodes the strength of the Communist Party that Xi Jinping seeks to ensure. In a time of crisis, this could backfire as the central government fails to act – as we are seeing now. At some point, the citizenry will expect a resolution of the virus crisis, and if there isn’t one, only Beijing will be left to blame.
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