Haver Analytics
Haver Analytics
| Nov 28 2022

Initial Thoughts on Protests in China

The widespread protests witnessed in China’s major cities over the weekend is something that has been brewing [1] for months. It is a cocktail of popular discontents with zero-covid restrictions (despite policy relaxation [2] earlier), constitutional changes [3] to remove the two-term presidential limit and a weaker economy [4], while the block fire [5] in Urumqi, Xinjiang was merely a flashpoint and had fanned the recent anti-government or “A4” [6] movement. The unfolding situation in China will have profound economic and geopolitical implications that will reverberate around the world.

Certainly, this poses one of the most serious challenges to Xi’s rule, especially since he was re-elected as country leader in the recent 20th Party Congress. It will be interesting to see how the Chinese authorities respond to this unprecedented wave of protests - the most concerted and largest since the democratic student movement in 1989.

Amongst the most energetic and idealistic, numerous students and at least 51 universities are again involved in this round of anti-government protests, suggesting that the movement is unlikely to die down easily. If the authorities cannot exert effective controls over the situation in the next couple of days, we should expect a series of policies to be implemented. In the policy toolbox, vaccinating the vulnerable and a further relaxation of Covid restrictions are on the cards, a potential mass arrest of activists and measures to restrict congregations and communications. Curfews may be widely imposed in affected cities, followed by an Iranian style internet shutdown [7] with authorities cutting off mobile internet and social media platforms. If everything fails, the worst-case scenario is a Tiananmen style crack-down, which is still a possibility if the Party is determined to cling on to power. In terms of geopolitics, China might employ a diversionary foreign policy, to divert public’s attention away, instigating disturbances in the South China Sea and Taiwan strait. However remote the possibility, experts might reassess the timeline for the annexation of Taiwan [8].

Overall, the instability witnessed so far will likely linger on well into 2023 if no meaningful measures are implemented to avert the situation. The above-mentioned policies to restrict movement and information flow in major cities that generate a significant portion of the country’s economic output, if put into effect, will dent the economy further, dashing hopes for more job creation [9] which is key in promoting social stability. This truly is a dilemma for the Party. These measures will also have negative impacts on the world’s supply chains [10].

References: [1] https://www.bbc.co.uk/news/world-asia-china-63633109 https://www.washingtonpost.com/world/2022/10/14/china-protest-sitong-bridge-haidian/ https://www.bbc.co.uk/news/world-asia-china-63447755 [2] https://www.bloomberg.com/news/articles/2022-11-11/these-are-the-20-measures-guiding-china-s-covid-easing-efforts [3] https://www.bloomberg.com/news/articles/2022-10-18/anti-xi-slogans-in-rare-beijing-protest-spread-within-china?leadSource=uverify%20wall [4] https://www.imf.org/en/News/Articles/2022/11/21/pr22401-imf-staff-completes-2022-article-iv-mission-to-the-peoples-republic-of-china#:~:text=Following%20the%20impressive%20recovery%20from,percent%20in%202023%20and%202024. [5] https://www.bbc.co.uk/news/world-asia-china-63752407 [6] https://www.independent.co.uk/news/world/protesters-china-blank-paper-white-covid-b2234009.html [7] https://www.forbes.com/sites/emmawoollacott/2022/09/22/iran-shuts-down-whatsapp-and-instagram-as-protests-spread/ [8] https://www.spectator.co.uk/article/a-chinese-invasion-of-taiwan-is-coming/ [9] https://foreignpolicy.com/2022/08/04/xi-china-unemployment-jobs-economy-crisis-youth-mao-great-leap-forward/ [10] https://edition.cnn.com/2022/11/25/tech/apple-foxconn-iphone-supply-china-covid-intl-hnk/index.html

  • Kelvin Ho-Por Lam is a former Greater China economist with HSBC Global Markets. Before joining HSBC, he was a member of the Asia economics team at Citigroup Global Markets in Hong Kong. Prior to his return to Hong Kong in 2015, he was a UK economist at Santander in London and a property economist at MSCI Inc. In 2019, Mr. Lam was elected as a Hong Kong district councillor for the Southern district.   Kelvin graduated from the University of Southampton in 2001 where he studied economics and finance. He also holds an MSc degree in economics from the University of York and an MSc in management from the London School of Economics and Political Science.

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