Don’t bet on lockdown lifting

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Don’t bet on lockdown lifting

Nam Jeong-ho

The author is a columnist of the JoongAng Ilbo.

Some Koreans hope that Chinese President Xi Jinping will be confirmed for his third term at the 20th National Congress of the Communist Party of China (CPC) on Oct. 19. They expect that Korea-China exchanges will normalize with Beijing’s easing of the zero Covid policy and lockdowns. They are largely the people whose interests are intertwined with China, such as traders and tourism industry workers.

The zero Covid policy has been crippling the Chinese society and economy. Cities were entirely locked down when there was a single patient, which paralyzed the economy. During the first half of the year, 460,000 companies went bankrupt and 3.1 million self-employed businesses were shut down. In addition, after the worst-ever real estate market slowdown fueled the crisis, China’s growth rate dropped to 0.4 percent.

Analysts said the Xi administration pushed the zero Covid policy despite such ill effects because of the party congress. If the government revises the policy, it would be an admission of wrong, which will hinder Xi’s election to a third term. Many expect China to give up the draconian public health policy after the congress.

Is that true? Unfortunately, it is likely wishful thinking. First, most Chinese people have not been exposed to the virus. Although the country was the origin of the pandemic, the officially confirmed infections are only 996,000, or 0.0007 percent of the country’s 1.42 billion population. Most countries have recorded confirmed cases between 30 to 60 percent of their populations — Korea at 48.1 percent and France at 55.6 percent. Compared to them, China’s figure is extremely small.

Furthermore, the China’s vaccine loses its immunization power after six months. When the zero Covid policy is lifted, the disease will rapidly spread and the country will highly likely face a collapse of its medical system.

Second, many Chinese people, despite the economic crisis, support lockdowns. While hundreds of thousands of people were killed by the pandemic overseas, China only recorded 15,000 deaths thanks to strict lockdowns. It is no wonder that many Chinese people are supporting the strict lockdown policy.

Third, the economy in general is hurt by the lockdown policy, but some companies are enjoying enormous profits and many of them are linked to the top leaders in Beijing. In fact, the top 10 Covid testing machine manufacturers recorded 48.5 billion yuan ($6.79 billion) in sales and 16.3 billion yuan profits during the first half. Companies that enjoy such astronomical profits will not welcome the lifting of the lockdown policy, which requires strict tests.

Last, the leadership of China, including Xi, is reportedly fearful of the pandemic, although the disease’s fatality is weakening and the rest of the world is increasingly adopting looser policies. Xi was the only world leader who sent sympathy messages to U.S. President Joe Biden and Japanese Prime Minister Fumio Kishida when they were infected by the virus. Based on such reasons, China will likely maintain its lockdown policy for a while despite the massive economic cost.

Under such circumstances, what will be Korea’s strategy since it is highly dependent on trade with China? As time goes by, trade between Korea and China became more focused on the trade of intermediate goods than final goods. Last year, 79.6 percent of Korea’s exports to China were intermediate goods. In this structure, slowed production in China due to the lockdowns and subsequent economic recession will likely deal a big blow to the Korean economy.

To avoid such a situation, a reshoring policy to bring Korean companies in China back home can be a solution. Moreover, goods heavily dependent on China should be produced in Korea. If that is difficult due to the cost problem, they should be produced in Southeast Asian countries instead. We can learn a lesson from China’s history of building overseas industrial complexes in Thailand and Cambodia.

We must stop expecting that China will lift its lockdown policy after Xi’s election to his third term. It is wise to use this opportunity to think about a national plan to significantly reduce the Korean economy’s dependence on China.
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