Eruptions in the east… From Beijing to Shanghai, thousands of Chinese residents took to the streets (and social media) over the weekend to protest the country’s strict zero-Covid policies. Some called for President Xi to step down. China has extended lockdowns and tightened restrictions in certain areas after reporting 253K+ Covid cases over the past three weeks. Now things may be reaching a breaking point:
- On Thursday a fire in China's western city of Urumqi killed 10 people trapped in a high-rise building, which was under partial lockdown and reportedly inaccessible to first responders.
- It’s a big deal: The deadly fire sparked mass protests to Xi’s authoritarian government on a scale not seen in decades.
- In markets, stocks sank yesterday while oil fell to its lowest level since January, as investors feared that China’s domestic conflict could jolt the global economy.
The Covid fallout… Earlier this month China said it would ease some quarantine rules to curb the economic damage. But its plans have been thwarted by outbreaks in 80 of its cities, which generate half of China’s GDP. It’s hurting the economy:
- Last month, China’s retail spending shrank by 0.5% from a year ago, the first decline since May. Meanwhile, China's exports dropped for the first time since 2020.
- China's economy is expected to grow about 3% this year — nearly half of the 5.5% expected in March.
China could be at a tipping point… While its strict Covid policy has crippled global supply chains and companies including Apple, it’s affecting Chinese citizens the most. Though some analysts say the unrest could cause Xi to crack down even further, others are optimistic that the protests could spur the government to unwind some of its policies.