Policy pivot

You may be surprised to learn that ‘goblin mode’ has just been selected by English speakers as the ‘word of the year’. Referring to behaviour that is “unapologetically self-indulgent, lazy, slovenly, or greedy, typically in a way that rejects social norms or expectations”, it comfortably beat ‘metaverse’ in the annual ballot at Oxford University Press (OUP) to determine the most topical word of the last 12 months.

‘Goblin mode’ was first used on Twitter in 2009, OUP noted, but the term flooded social media in the second half of this year when Covid restrictions were eased in many countries. Interestingly, China’s media has translated ‘goblin mode’ as tangping or ‘lying flat’ – a reference to a subculture of younger Chinese that prefers to opt out of the rat race (i.e. working long hours in search of riches) in favour of just doing enough to get by (see WiC544).

Tangping has also made its way into everyday conversations, even cropping up at press conferences held by senior officials. The interpretation and usage of the term is always shifting too. In recent days tangping has been repurposed as a label for China’s modified approach to fighting Covid-19, for instance, after the government seemed to call time on its ‘zero-Covid’ policy and pivot towards a more ‘lying flat’ attitude to living with the pandemic.

What has changed?

At the beginning of the year, when the Omicron variant pushed infection rates to new highs around the world, questions were already being asked about how long China could stick to ‘zero-Covid’ and at what cost (see WiC569).

As things turned out Beijing stuck to the policy longer than many expected: the central government seemed prepared to bear the economic damage created by its more draconian controls and quarantines in the interests of minimising Covid-related deaths.

However, when social stability proved to be at stake, Beijing finally relented in its approach.

This followed waves of anti-lockdown protests at the end of November that were triggered by a deadly fire in Xinjiang. The Chinese authorities denied reports that fire rescue efforts were delayed by lockdown measures in Urumqi yet the story resonated darkly with disgruntled urbanites in a host of other cities, bringing them out onto the streets in protest. Fed up with the Covid controls, some demonstrators went as far as calling for Chinese leader Xi Jinping to step down (see WiC610).

The unrest soon subsided and it remains to be seen whether any of the protestors will bear the consequences for making their discontent so publicly known. But China’s political elite has taken note, responding to the main thrust of the demonstrators’ demands by easing some of the most draconian Covid controls (the Wall Street Journal reported this week that also very influential was a letter sent by Foxconn’s boss Terry Gou last month to the government warning that zero-Covid policies were putting at risk China’s key role in global supply chains).

Last month the central government had already announced 20 new measures to fine-tune its ‘zero-Covid’ stance – including shortening quarantine periods for close contacts of infected people. This week, presumably because of the pressure arising from the anti-lockdown protests, local governments began to roll back their Covid policies even further.

First to go: mass testing, a cornerstone of the former policy. Previously residents needed to show negative PCR (polymerase chain reaction) test results to take public transport and visit public spaces such as restaurants. In recent days major cities including Beijing and Shanghai have dropped this requirement, which sometimes forced local residents to queue for hours to be tested.

Different cities are employing different approaches as the full force of the previous rules starts to recede. In Shanghai, for instance, residents no longer need to show negative PCR results from within the last 48 hours in order to enter restaurants and shopping malls. Some other cities have relaxed their approach even further, including the frequencies at which residents have to take tests for the virus.

The much-maligned ‘community control’ policy – i.e. measures to lockdown whole districts, and even cities in the case of Shanghai in April – has been relaxed as well. According to Xinhua, a number of cities including Beijing will no longer impose district-wide lockdowns. The installation of fences and other solid barriers to seal off residential complexes will also be forbidden (this was one of the suspected factors for why residents burned to death in the Xinjiang apartment block fire). And there have also been adjustments in the definitions of ‘close contacts’ of infected people, as well as who should be sent for compulsory quarantine and for how long.

Most importantly, instead of adhering strictly to the central government’s zero-Covid stance (and exceeding it in some cases), local governments seem to have been given the nod to take a more flexible approach. Previously local officials got sacked for failing to apply the central government’s zero-Covid mantra strenuously enough, incentivising many of them to respond to local outbreaks even more ruthlessly (or see their careers terminated).

So it’s the endgame for zero-Covid?

The most sweeping changes yet were unveiled on Wednesday – less than a month after Beijing began to talk about ‘optimising’ its Covid policies. Following the 20-measure circular announced on November 11, the State Council’s prevention and control task force published another directive with 10 further measures.

Some of the changes have codefied the steps already taken in various cities over the past week, although the new directive might also be considered as the biggest step yet towards the demise of zero-Covid. Most importantly, asymptomatic carriers and people with mild symptoms can now undergo home quarantine, while close contacts only need to undergo five days of home quarantine (this compares with seven days in Hong Kong, where the government has effectively taken a tangping approach since several million people were infected by Omicron in March and April).

The circular also states that apart from special places such as nursing homes, medical institutions and schools, negative PCR tests are no longer required to access public venues or for domestic travel.

A modified stance?

Of course, there’s been no formal declaration that the government has abandoned the erstwhile totemic zero-Covid policy. Such an abrupt turnaround in thinking would be rather awkward: Beijing has taken credit for how its zero-Covid measures had kept infection and death rates so low in the world’s most populous country.

However, savvy analysts picked up on an important nuance this week when state media outlets stopped mentioning ‘dynamic zero-Covid’ in their reporting.

The government is also trying to explain that its strategy doesn’t actually imply ‘zero infection’ but more of a contain-and-control campaign that was always dynamic in nature, aiming to wipe out new outbreaks as quickly as possible.

That emphasis is a semantic nicety, however, especially for those that see recent events as a more dramatic U-turn in policy. As we reported last week, Hong Kong was on the verge of a complete lockdown in February after Xi Jinping ordered the city’s government to “take all necessary measures” to combat a surge in local cases. Less than a month later, after exponential growth in Omicron cases, the former colony had little choice but to switch to a tangping approach.

Even at the end of last month, senior political figures were still insisting that officials would “tenaciously pursue the general policy of dynamic zero-Covid”. Vice Premier Sun Chunlan, the senior official with responsibility for the country’s Covid response, also reiterated last week that recent adjustments were neither a “full reopening” nor “lying flat”. She said the government was still making health and safety the priority, although the country had to deal with “new tasks” in epidemic prevention and control as “the pathogenicity of the Omicron virus weakens while more people are vaccinated”.

This was the first time that a senior figure had publicly acknowledged that the coronavirus is no longer such a grave threat to public health and it spurred local government officials to adopt a similar tone.

In a public service message in Guangzhou a group of health experts suggested that the symptoms of Omicron have proven very mild, for instance.

“The virulence of the new coronavirus has now evolved to the level of the seasonal flu, and some [strains] are even less virulent than the flu, so you really don’t need to panic,” one of the medical experts said in the broadcast.

How has the public reacted?

If the anti-lockdown protests last month are anything to go by, public frustration at zero-Covid had reached boiling point. This explains some of the more cheerful mood on social media this week as netizens discussed the chances of their daily lives returning to something closer to normality. At the same time, there was an uptick in anxiety from others (among the elderly, for example) at the risks of a sudden uptick in infections.

Despite the more reassuring line from the government, there are no illusions about the potential for a huge surge in infections once zero-Covid is no longer enforced. According to data from the World Health Organisation, China had already reported 9.8 million cases of Covid-19 and 30,567 deaths between January 3, 2020 to December 6, 2022. This translates into an infection rate of merely 0.7%. With a population that amounts to only a fifth of China’s, the United States has reported 97 million infections and more than one million deaths during the same period.

With the Chinese government now prepared to redirect some of its former focus on containing the spread of the virus, China Youth Daily reckons that up to 60% of the population could contract Covid-19 and that the infection rate could eventually reach 90% citing local healthcare experts.

That’s why self-help advice for dealing with the virus has been topping internet searches. Pharmacies have seen their shelves emptied as people stock up on drugs, both Western and traditional Chinese medicines (TCM), that could relieve symptoms.

CBN reports that capsules of Lianhua Qingwen, a TCM product recommended by healthcare authorities to treat mild cases of Covid has been selling out at pharmacies, as has ibuprofen (a similar thing happened in Hong Kong in March when it was practically impossible to buy Panadol at a time when the number of infections was surging exponentially).

Boxes of Lianhua Qingwen have more than tripled in price on e-commerce platforms, the newspaper also noted, while medical experts – worried by panic buying emptying pharmacies – have cautioned people against stockpiling drugs and treatments for the virus.

China is said to have more than 90% of its population fully vaccinated against Covid. However, less than half of over-80 years-old have received three doses of the locally-made vaccine. Hence the renewed efforts to get them jabbed: the State Council’s latest 10-point directive urges local governments to accelerate vaccination rates among people aged 80 and older, with some news outlets suggesting that Beijing wants more than 90% of that age group fully vaccinated before Chinese New Year takes place in January (a period when large numbers of people typically move around the country to reunite with family).

How has the market responded?

Bloomberg noted this week that the switch in Covid policy is moving faster than expected. “Despite a buildup in expectations in recent weeks, markets appeared to be taken aback by how far-reaching Wednesday’s moves were,” it added.

Another reason for the urgency: the Chinese economy grew just 2.5% in the first two quarters and 3.9% in the third. Most economists expect improved performance in the final three months of 2022 but growth for the full year is still expected to come in a lot lower than the State Council’s target of 5%.

Zero-Covid has been blamed for the disruption to supply chains and for torpedoing economic activity. Exports and imports both contracted by their biggest margins for several years in November too, because of weakening demand for Chinese goods in overseas markets.

In a sign that reviving business and exports has become a key priority the provincial government of Zhejiang this week chartered planes to send 10,000 company bosses overseas to win new orders and investment.

So if 2022 was defined by the zero-Covid policy, 2023 will be about getting the domestic economy firing again. That’s why the government’s pivot to more of a tangping approach is being cheered by fund managers, with international banks also starting to improve their outlooks for the Chinese economy, as well as lifting their weightings for Chinese equities, as they look ahead to 2023. 

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