The latest Covid outbreak in Tibet Autonomous Region (TAR) and its transmission to different parts of TAR as well as Qinghai, Sichuan and Yunnan Province is a severe blow to the Chinese administration to achieve the annual growth targets. The slowing Chinese economy is grappling with various issues such as unemployment, property market slump and slowing manufacturing.
In view of controlling the spread of Covid, the TAR authorities imposed lockdown in all the major cities including Lhasa, Shigatse (Opposite Sikkim), Shannan (opposite Tawang), Nagri (opposite Ladakh and Uttrakhand), Nagchu, Nyingchi (opposite Arunachal Pradesh) and Chamdo etc. The situation led to fall in tourism revenue.
To contain the rising Covid 19 cases in TAR and curb anti-China feelings, the authorities suspended more than 100 government officials citing negligence on their part in performing the duties. Under China’s zero-Covid policy, major cities of TAR have conducted mass testing, cancelled group events, suspended dine-in services and shut down indoor entertainment, cultural and sport venues.
In an apparent attempt to blame neighbouring countries, Global Times, a Chinese controlled mouthpiece alleged (August 8) that the increase in Covid cases in TAR was witnessed due to the trade exchanges through Shigatse, Nepal and Bhutan. However, Washington based International Campaign for Tibet (ICT) in a report (August 11) said that, the rising cases of Covid19 in Tibet was the result of large influx of Chinese tourists visiting Tibet mainly by train from mainland China. It pointed out that although China never allows journalists, diplomats and tourists from other countries to visit Tibet, it has encouraged Chinese tourists to travel to Tibet as part of its intensifying campaign to assimilate Tibet into Chinese society.
Meanwhile, the grievances of Tibetans inside Tibet have appeared on Chinese social media platforms like Weibo, Wechat, TikTok and other digital communication channels detailing the abusive behaviours of Chinese police and other officials. Separately, ICT criticized the Chinese authorities for strengthening surveillance on Tibetans in the guise of Covid restrictions.
It is not only Tibet, but there are other chinks in the Chinese economy. In the beginning of 2022 discussions in China focused on the potential strength of Chinese recovery, but lockdowns destroyed that narrative as the economy contracted in the second quarter (April-July) at over 10 percent annualized rate, posting only 0.4 percent year-on-year real GDP growth.
In view of re-occurrence of the Covid-19 in many large Chinese cities and uncertainties, China has abandoned official growth targets. Revenue of the property sector has declined by 31.4% so far in 2022 which would have a further downward pressure on GDP. Property sector constitutes 24 percent of the GDP and 30-35 percent of total credit. This would likely cause a major financial instability in China which is already witnessing a crisis in its shadow banking system and local financial vehicles.
Moreover, China’s long-term growth prospects are increasingly dependent on rebalancing the economy from infrastructure investment to innovation, from exports to domestic consumption, and from state led to market-driven allocation of resources.
It is expected that the times ahead would be tough for China due to the need for reworking and restructuring of ruptured industrial chain due to Covid pandemic, pressure of carbon reduction and global supply chain disruptions. Growing unemployment is breeding mistrust regarding government’s ability to resuscitate the economy. There is unprecedented pressure on Central and Provincial governments as they are confronting revenue shortages even to maintain their routine expenditure.
Meanwhile, the stimulus packages and tax breaks in China’s fight against Covid-19 led slowdown has worsened fiscal state of provincial governments. Local governments across China are ordering teachers and officials to pay back bonuses. Civil service bonuses have been suspended in Shanghai, Jiangxi, Henan, Shandong, Chongqing, Hubei and Guangdong. The demand for bonus reversals indicates that the Chinese government is undergoing something of a fiscal crisis.