Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
Economic recovery in China has been modest since the country emerged from the Zero-Covid crisis, and marketing will only be on track in 2024, rather than 2023, says marketing expert Ashley Dudarenokat CNBC.
CNBC:
Businesses in China are spending cautiously on advertising this year as local consumption isn’t expected to bounce back for a while yet.
Marketing revenue rose in the first three months of 2023 for several Chinese internet giants — but not Alibaba, the largest of them all by dollar value. That’s on a year-on-year basis.
Heading into the 618 shopping festival this month, brands remain cautious.
“For 618, generally of course brands will be trying, but compared to before it’s a bit more tired,” said Ashley Dudarenok, founder of ChoZan, a China marketing consultancy.
“We know it takes exactly the same amount of money to bring the customer into your shop today versus 2021, but the customer is going to spend about 30% less in your shop,” she said…
“The general consensus in the industry is that 2024 is going to be the year of growth and rebound,” Dudarenok said. “2023, let’s just get out of the downturn, stay connected with the platforms, with the customer,” she said.
Strategic analyst Victor Shih, author of Coalitions of the Weak, (2022), looks at China’s sudden exit from its contested zero-Covid policy. Was it because of the protests, was it planned before, and what does it mean for the country’s domestic policies and economics? A discussion at the New Yorker on how decisions at the top-level take place.
The New Yorker:
Were these policy changes announced because of the protests, or for economic reasons?
We don’t have a lot of detail. But, as far as some of us can piece together, there has been a debate among top-level leaders. And we definitely can see the debate among experts who advise the Chinese government on the degree of opening. For a long time, there has been a side which strongly advocated for the continuation of a “zero covid” policy. But in recent months, even before the protests began, there were experts in the Chinese government who increasingly spoke out in favor of a more relaxed approach, emphasizing vaccination instead of draconian levels of quarantine. And I think the protests perhaps tipped things a little bit more in favor of the opening camp, or at least some degree of opening. It is unclear at this point how much opening there will be.
It really speaks to the challenge of authoritarian government, especially a kind of dictatorship that controls all forms of media, and has explicitly ordered the media to obey everything the government wants to convey. Sometimes even the Politburo itself does not get a lot of information about the level of satisfaction or dissatisfaction in the population. It took something like a multi-city protest to really make Xi Jinping realize that perhaps there is a groundswell of demand for a more relaxed approach.
Your answer implies a certain amount of debate on this, that it’s not just Xi making these decisions on his own. Is that how you see it?
At the highest level, among Politburo Standing Committee members, we don’t know whether there has been a debate. I suspect that there has been—not an open debate, but someone must have pushed some of this expert opinion to the Politburo level for the opening that we’re seeing to happen so quickly. Briefing material about why opening is potentially justifiable, and potentially not so disastrous for China, must have been there already or it wouldn’t have happened so fast after these protests.
I think that someone like Sun Chunlan, who is in charge of health policies in China, must have read a lot of this briefing material. Whether she was in favor of more opening to begin with is unclear. In fact, I think that may not be the case. It might have been someone else who has been advocating for more opening. The rumor is that Wang Huning, who’s a Politburo [Standing] Committee member, and has been an adviser to Xi Jinping since he took office, was or has been the person pushing for a more relaxed approach to covid. But these are just rumors…
Were you surprised by how quickly, at least publicly, China backed away from its covid policies? People I’ve talked to who know more than me seemed a little bit surprised.
I was surprised. There was this rumor that Wang Huning was advocating it for quite some time, but I never really believed in that rumor. I don’t really know if that’s the case. But it would take an advocate at that level to make it happen. There are two surprising aspects of this. One is that, in some places at least, we are seeing lockdown policies being liberalized very rapidly. And even in Beijing. My previous assessment had been “Oh, there could be relaxation in other parts of China, but certainly not Beijing, where the leadership lives.”
Now China suddenly started to retract its zero-Covid strategy, strategic analyst Ian Johnson looks back at how the country got itself into this unprecedented mess at the Prospect. The economic slowdown and high unemployment “are all underlying issues that actually make the government’s challenge greater than first appears,” says Ian Johnson.
The Prospect:
First, China’s domestically produced vaccine is not very good. According to a study from Hong Kong, the Sinovac vaccine has an effectiveness of just 60 percent. Furthermore, its recipients “were three times more vulnerable to die compared to those inoculated with the German Pfizer-BioNTech vaccine.” The Chinese company Fosun Pharma signed a joint venture with BioNTech to produce an mRNA vaccine but has been waiting for approval for over a year. Ian Johnson, the Stephen A. Schwarzman Senior Fellow for China Studies at the Council on Foreign Relations, believes China’s refusal to approve the vaccine is because they “want to have their own domestic champion” to develop the vaccine. “The contract from the Chinese government to make 1.4 billion vaccines and another 1.4 billion boosters, that is a lot of money.” he told the Prospect.
Second, while Western countries prioritized vaccinating the elderly, China has not. While about 90 percent of the whole population has gotten a primary sequence of shots, just 66 percent of those over 80 years old have—and just 40 percent have gotten a booster shot…
Economically, China’s lockdowns have had brutal effects in a country that prides itself on its economic strength. Analysts estimate GDP growth will be just 3 percent in 2022—the worst figure since 1990, aside from the pit of the pandemic in 2020. The CSI 300 Index is down 22 percent since the beginning of the year, and in October, 207.7 million people, responsible for one-fifth of China’s 2021 GDP, were under some form of lockdown policy. The economic hardships of COVID lockdowns are particularly affecting the younger generation, with youth unemployment at 18.7 percent in August. There is “a sense of let’s get back to the times when China’s economy was growing faster and tomorrow was a better day,” says Johnson. The economic slowdown and high unemployment “are all underlying issues that actually make the government’s challenge greater than first appears.”
President Xi has backed himself into a corner. Either he can loosen lockdown restrictions as protesters have requested, and risk carnage, or quadruple down on zero-COVID, risking further discontent. It appears Xi will go with the first option, as sources claim China will ease quarantine restrictions and mass testing. “The problem is, when they do that, they are going to have to accept that a lot of people are going to die. No matter how good the vaccine rate is or how good the vaccine is, the fact is there are people who are going to die from COVID,” says Johnson.
As for the protests, Johnson believes they are a significant moment but not a turning point in China. The protests “may be a harbinger of the future challenges the party faces in keeping a lid on things as it enters a period of slow economic growth.” China has made efforts to prevent protests from continuing—sending police to the protest locations, placing barriers along the routes, and shutting down a small protest and arresting protesters in Hangzhou. The Biden administration has supported the right of the Chinese to protest, with Republican leaders criticizing his response as lackluster. But for President Xi, foreign criticisms are the least of his problems.
China is taking a short breath from the anti-Covid protests and comes to terms with the effect of the sudden relaxation of the zero-Covid measures. Political analyst Victor Shihtakes a step back at KQED and looks at the fallout of the protests in the short term.
KQED:
What do we know about the protests? What’s exceptional about them?
Shih: The scale in terms of the number of people participating is not especially large, but in terms of the geographical spread and also the demands that were voiced by the protesters, really it is something that we have not seen since 1989. These are protests taking place over a dozen cities, and while they mostly call for less COVID restrictions, there are quite a few instances of protesters asking for fundamental political reform. Even at an elite institution like Shanghai University, which has produced half the top leaders of China — including Xi Jinping himself — there were calls for rule of law and freedom. That’s really striking and is something that we have not seen for several decades…
It seems like this zero-COVID approach is causing the Chinese Communist Party and Xi Jinping a lot of trouble. So why not do something else?
Shih: You have to remember that China spent pretty much the past three years trumpeting the successful approach in controlling COVID up until recent months. After the initial wave of very tragic infections and deaths in Wuhan, the Chinese government was able to control the spread of COVID at a time when, in most countries in the world, COVID spread pretty much uncontrollably, leading to millions of deaths.
Up until the end of 2021, we there has been a very low spread of COVID and a very low number of deaths in China. And so the Chinese government made a lot of that fact. For them to suddenly change course and to open up and to allow the sort of rampant spread of COVID, I think that will create another wave of crisis maybe among a different population, among older people, among people who work for the Chinese government and who were at the forefront of trying to enforce the COVID lockdown policies. So I think either way that they go, they will create some kind of problem with some segment of the population.
Xi Jinping’s grip on power in the party is pretty absolute at this point, because he has inserted very trusted followers in the People’s Liberation Army and also in the internal security services. Once you control those two parts of the Chinese government, you pretty much have all the levers of power. So I don’t think that will change. But we have seen some softening of COVID policies because of the protests. And of course, that could be tactical. But the economic costs of COVID lockdown is quite substantial. I think a lot of people around Xi probably are beginning to suggest to him that that COVID policies need to change or the Chinese economy is really not going to be in a good place…
Shih: I think the protests both in China and also overseas are having a very enormous medium-term impact. In the literature on protests, one of the deepest insights, I think, is from Professor Timur Kuran, who’s at Duke University. His insight is that with protests, especially in authoritarian regimes, people who previously have been very isolated from each other, who didn’t know that other people felt the same way, when they showed up on the streets, they all realized that actually there are quite a number of people who feel the same as them.
This is especially true in China, but also true outside of China, where, of course, a lot of people who have been unhappy with the Chinese government have left China and have come especially to the United States. But they didn’t know that there were so many others like them.
So with these protests, they suddenly realized that there’s actually quite a large community of people who are just like them. This “information revelation,” which is what we call it in the literature, will encourage them to participate in further protests.
And, of course, this mechanism will be especially strong overseas where there is not the threat of arrest when you participate in anti-Chinese government protests. So I think this will have a long-lasting impact.
Author and journalist Zhang Lijia answers questions from viewers at Sky News on the protests against China’s zero-covid policies and the Tiananmen uprising in 1989 when she organized protests in Nanjing. Also joined by political scientist and economist Francis Fukuyama.
When even an acknowledged China bull like strategic analyst Shaun Rein turns negative on its short-term economic development, things do not look well for the middle kingdom. “Consumer confidence has brutally collapsed and I think investors need to think twice or maybe even three or four times before investing in China right now,” says Rein in the Economic Times.
Shaun Rein
I have been in China for 25 years and this is by far the worst consumer confidence and business confidence I have ever seen and it is really because of the implementation of zero Covid. Most people in China actually support zero Covid because it saves lives and the Chinese government should be credited for what they did in 2020 and 2021 but in 2022, the implementation has been a disaster. That is the only way you can word it. It has hurt mental health, it has hurt other health issues and it has actually killed people because people cannot get to hospitals or as we saw in Xinjiang and Urumqi fire, people could not get out of their homes.
Consumer confidence has brutally collapsed and I think investors need to think twice or maybe even three or four times before investing in China right now. The next three to six months are going to be a real struggle because the government cannot ease up on zero Covid without causing a lot of deaths but they cannot continue the current pace without causing a lot of lack of business confidence. We are in a very difficult conundrum right now. No matter what the government does, the economy is going to be weak for the next three to six months…
The problem that we have right now is each province, each city, each district, even each street are making up their own rules as they go along and they are not following the directives of the central government. So sometimes the street will put up barriers and say one cannot cross the street. These local officials do not have the right to do that, the central government is telling them that they do not have the right to do that but they are so scared of Covid, that they are still putting up barriers.
China’s leaders face unprecedented protest against its rigid anti-covid policy after earlier this week ten deaths in Urumqi were to blame for that. Political analyst Victor Shih sees China’s Communist Party walking on a tight rope, he says in the Hindustan Times.
The Hindustan Times:
An expert on China said Beijing has missed maintaining a balance between Covid control and economic growth, leading to citizens’ anger.
“Basically, what the (Chinese) leadership wants, a fine balance between growth and Covid control, is beyond the capacity of grassroots level enforcers. Instead, they are using draconian measures which invite popular anger,” Victor Shih, Associate Professor, School of Global Policy and Strategy, UC San Diego, expert on Chinese elite politics, said.
There is apprehension that the ruling Communist Party of China could respond with hard measures against the protesters.
“In the short term, the government walks a tight rope between too little repression, which may lead to more protests, and too much, which triggers backlash protests. Unfortunately, with the pervasive surveillance in China, the government will be able to arrest and punish the ring leaders after things have cooled,” Shih added.
“However, with Covid policies still unclear, popular anger may persist for a long period of time, something the regime has not had to deal with for decades,” Shih said.
China analyst Victor Shih, author of Coalitions of the Weak, discusses with Bill Bishop and Cindy Yu at China Whispers on how the move from collective leadership to a centralized power might change policies in China after the 20th Communist Party Conference including the current line-up of the leadership, zero-covid and Taiwan.
China’s economy is heading for a rough time as it continues to curtail activities under its dynamic zero-COVID policies, says Shanghai-based business analyst Shaun Rein in the Global Eye. Heatwaves, drought, and high unemployment among youngsters add to those problems, he says.
