Analyzing the Biden-Xi meeting; Beijing eases ‘zero-COVID’ by ‘optimizing’ epidemic prevention & control

     SinoInsight  1     

President Joe Biden and CCP general secretary Xi Jinping held a three-and-a-half hour meeting on the sidelines of the G20 summit in Bali, Indonesia.

The White House readout of the Biden-Xi meeting contained the following noteworthy points:

• Biden told Xi that the United States will “continue to compete vigorously with the PRC.” Competition, however, “should not veer into conflict,” and both countries must “manage the competition responsibly and maintain open lines of communication.”
• Biden said that both countries must work together on “transnational challenges” like “climate change, global macroeconomic stability including debt relief, health security, and global food security.” Both leaders agreed to “empower key senior officials to maintain communication and deepen constructive efforts on these and other issues,” as well as “address specific issues in U.S.-China bilateral relations” through “existing mechanisms,” including “joint working groups.”
• Biden “raised concerns about PRC practices in Xinjiang, Tibet, and Hong Kong, and human rights more broadly.”
• Biden said that the U.S. “one China” policy has not changed, opposed “any unilateral changes to the status quo by either side,” and added that “the world has an interest in the maintenance of peace and stability in the Taiwan Strait.” He also raised “objections to the PRC’s coercive and increasingly aggressive actions toward Taiwan.”
• The readout said that Biden and Xi “reiterated their agreement that a nuclear war should never be fought and can never be won and underscored their opposition to the use or threat of use of nuclear weapons in Ukraine.”
• Biden raised concerns about North Korea’s “provocative behavior.”
• Secretary of State Antony Blinken will visit China to follow up on the G20 discussions. A senior State Department official said that Blinken’s trip is tentatively planned for 2023.

In a press conference after the meeting, Biden made the following notable remarks:

• When asked whether a “new cold war” with China can be avoided and if the PRC is planning to invade Taiwan “at some point,” Biden said, “I absolutely believe there need not be a new Cold War … And I do not think there’s any imminent attempt on the part of China to invade Taiwan.”
• When asked about whether Xi is “more confrontational or more conciliatory and willing to compromise,” Biden said, “And do I think he’s willing to compromise on various issues? Yes. I think he understands that … how can I say this tactfully? I think the election held in the United States … has sent a very strong message around the world that the United States is ready to play.”
• With regard to North Korea, Biden said, “I’ve made it clear to President Xi Jinping that I thought they had an obligation to attempt to make it clear to North Korea that they should not engage in long-range nuclear tests … I’m confident China is not looking for North Korea to engage in further escalatory means.”
• In concluding the press conference, Biden said, “I want to be clear, and be clear with all leaders, but particularly with Xi Jinping, that I mean what I say and I say what I mean, so there’s no misunderstanding.” He added that the biggest concern is that there is a “misunderstanding about intentions or actions on each of our parts.”

PRC state mouthpiece Xinhua made the following noteworthy points about the Biden-Xi meeting in its official report:

• Xi said, that “China and the United States need to have a sense of responsibility for history, for the world and for the people, explore the right way to get along with each other in the new era, put the relationship on the right course, and bring it back to the track of healthy and stable growth to the benefit of the two countries and the world as a whole.”
• Xi expounded on the “20th Party Congress and its key outcomes, pointing out that the domestic and foreign policies of the CCP and the Chinese government are open and transparent, with clearly stated and transparent strategic intentions and great continuity and stability.”
• Xi said that the PRC is “committed to deepening and expanding global partnerships, safeguarding the international system with the United Nations at its core and the international order underpinned by international law, and building a community with a shared future for mankind.”
• Xi said that “China-U.S. relations should not be a zero-sum game where one side out-competes or thrives at the expense of the other. The successes of China and the United States are opportunities, not challenges, for each other. The world is big enough for the two countries to develop themselves and prosper together.”
• Xi said that he takes very seriously Biden’s “five-noes” statement. The “five-noes” are no “new cold war,” no changing of China’s system, no revitalizing of alliances against China, no support for “Taiwan independence,” and no conflict with China.
• Xi said that the PRC “does not seek to change the existing international order or interfere in the internal affairs of the United States, and has no intention to challenge or displace the United States.” Therefore both sides should “respect each other, coexist in peace, pursue win-win cooperation, and work together to ensure that China-U.S. relations move forward on the right course without losing direction or speed, still less having a collision.”
• Xi said that “the Taiwan question is at the very core of China’s core interests, the bedrock of the political foundation of China-U.S. relations, and the first red line that must not be crossed in China-U.S. relations.” He added that the PRC “hopes to see, and are all along committed to, peace and stability across the Taiwan Strait, but cross-Strait peace and stability and ‘Taiwan independence’ are as irreconcilable as water and fire.” Xi also noted that Biden “said on many occasions that the United States does not support ‘Taiwan independence’ and has no intention to use Taiwan as a tool to seek advantages in competition with China or to contain China,” and hopes that “the U.S. side will act on this assurance to real effect.”
• Xi said that the U.S. has “American-style democracy” and the PRC has “Chinese-style democracy,” both of which are in line with their “respective national conditions.” He added that “democracy versus autocracy” does not conform to the “trend of the development of the times.”
• Xi said that the U.S. is pursuing capitalism and the PRC is pursuing socialism, which are different paths. If both countries are to get along, then they must “recognize and respect this difference, instead of imposing uniformity and trying to change or even subvert the other party’s system.”
• Xi criticized the U.S. for “fighting trade wars and technology wars, artificially ‘building walls and barriers,’ forcing ‘decoupling and breaking (supply) chains,’ completely violating market economic principles and undermining international trade rules,” as well as “politicizing and weaponizing economic, trade, and technological exchanges.” He added that both sides need to “benefit from each other’s development” as the U.S. and the PRC deepen economic integration. Also, it is in the “common interest of both sides” to see that “the global economy recovers after the pandemic, climate change is addressed, and regional hotspot issues are resolved.”

OUR TAKE
1. The Xinhua report of the Biden-Xi meeting and President Biden’s remark about Xi Jinping being willing to “compromise on various issues” provide affirmation of what we have been saying since at least early October 2022. That is, after securing his political objectives at the 20th Party Congress, Xi could “de-escalate tensions and improve ties with the U.S.” and even China’s neighbors as the CCP implements measures to more deeply integrate the PRC with the world to create more opportunities for the Party to survive crises and build itself back for greater dominance.

Xi has no choice but to make compromises and seek an easing of tensions with the U.S. as he struggles to resolve the many internal and external ills plaguing the PRC. Yet we noted previously that his ability to effectively pull off a policy “about-face” on Sino-U.S. relations and other issues “will be restricted by the degree to which he can overcome systemic problems in the CCP regime like ‘orders not leaving Zhongnanhai’ and officials sticking to ‘prefer left rather than right,’ ‘one-size-fits-all,’ and ‘campaign-style’ approaches, as well as other Party culture-derived habits.”

Meanwhile, both Xi and Biden’s remarks on Taiwan affirm our analysis that Xi is not planning an invasion of Taiwan in the immediate future. As we wrote at the time, “Xi will look to ‘delay and wait for change’ (以拖待變), prioritize fixing the CCP’s problems and build up strength, and wait for significant changes in the international environment (i.e. America experiencing visible and irreversibly economic decline, global depression, etc.) before invading Taiwan if he really has to; Xi will still want to achieve a ‘peaceful reunification’ of Taiwan and accomplish the CCP’s global domination agenda through non-kinetic means where possible. But until the CCP is in a strong enough position to see through its ‘the East is Rising, the West is in decline’ assessment, Xi will likely attempt to steer clear of forceful ‘reunification’ and strive to avoid conflict with the U.S. and its allies. Conflict avoidance, however, does not mean that Xi and the CCP will abandon military maneuvers around Taiwan, ‘wolf warrior’ diplomacy, and the occasional belligerent language, though such measures could be toned down if they are deemed unnecessarily risky.”

2. Xinhua’s report on the Biden-Xi meeting reveals that Xi Jinping is still very concerned about “anti-Xi, not anti-CCP” efforts and ideological conflict with the U.S. more broadly.

Xi and the CCP have consistently made efforts to refute and denounce what it perceives as efforts by the U.S. and the international community to promote regime change in China through ideological battle, which includes such approaches as differentiating between the Party and the Chinese people under the Trump administration and the “democracy versus autocracy” framework advanced by the Biden administration. Xi again made the CCP’s stance clear in meeting Biden by noting that “democracy versus autocracy” does not fit the “trend of the development of the times,” and calling on Washington to “recognize and respect” the difference between “capitalist America” and “socialist China” instead of “imposing uniformity and trying to change or even subvert the other party’s system.” We previously explained why the CCP fears ideological conflict.

Xi’s effort to expand on the 20th Party Congress “and its key outcomes” is a sign that he is troubled by growing “anti-Xi, not anti-CCP” trends in the international community. By emphasizing that the CCP and the Chinese government have “clearly stated and transparent strategic intentions and great continuity and stability,” Xi is subtly indicating that the PRC will see “continuity and stability” in its policies and “reforms”—including improving the Sino-U.S. relationship and working with Washington on the latter’s interests—so long as he remains in power and is in control of the regime.

3. Washington has an interest in working with Xi Jinping to advance its climate agenda, resolve the Russia-Ukraine war, stabilize the global economy and supply chains, and accomplish other “transnational challenges.” If Xi and the CCP show good faith in cooperating with the U.S. and its allies on various international issues, then the current easing of tensions between the U.S. and the PRC could be prolonged. New UK prime minister Rishi Sunak’s indication on Nov. 15 that he will abandon a plan to reclassify China as a threat and that his position is “highly aligned with our allies” hints at a coming détente between the PRC and the U.S. and its allies. Actions from both sides in the near future will determine whether Sino-U.S. tensions were truly de-escalated at the Biden-Xi meeting in Bali, or whether it was merely a lull in deepening “great power” competition.

The U.S. and its allies, however, may not fully revert to the “engagement” policies of the pre-Trump era regardless of the extent to which relations with the PRC are improved. For one, the international community appears to have arrived at a consensus of sorts that the CCP is a legitimate threat to the global order, and could remain wary of the PRC as long as the “revisionist” Xi is in charge. Meanwhile, Congress is still keen to arm Taiwan and the U.S. continues to bring other allies on board in imposing export controls targeting China’s chip industry. The semiconductor issue in particular is a matter of U.S. national security, and Washington will not want to allow the PRC to catch up with the U.S. too easily on the technological front. That being said, “good behavior” by Xi and the CCP could see the Biden administration relax some restrictions through issuing limited licenses for advanced chips to some companies, or tweaking export controls to grant the PRC some breathing space.

     SinoInsight  2     

Economic figures

Nov. 15
The PRC National Bureau of Statistics (NBS) released economic data for October:

• Industrial output increased 5.0 percent in October from the previous year, down from a 6.3 percent rise in September and lower than growth of 5.2 percent in a Reuters poll.
• Retail sales fell 0.5 percent in October from a year ago, the first decrease since May 2022. This was lower than an expected increase of 1.0 percent and compared with a 2.5 percent gain in September.
• Catering revenue fell 8.1 percent in October from a year earlier, compared with a drop of 1.7 percent in September.
• Real estate investment decreased 16.0 percent year-on-year in October, the biggest drop since January-February 2020 according to Reuters calculations using NBS data. This is compared with a 12.1 percent fall in September.
• Property sales measured by floor area fell 23.2 percent year-on-year in October, the 15th straight month of drops.
• Fixed asset investment grew 5.8 percent in the first 10 months of 2022, compared with growth of 5.9 percent in January-September and expectations for a 5.9 percent rise.

Responding to the weak data, Citi revised its year-on-year GDP forecast for China in the fourth quarter to 3.7 percent from 4.6 percent, while JPMorgan lowered its forecast to 2.7 percent from 3.4 percent.

Zero-COVID

Nov. 10
The Politburo Standing Committee held a meeting to hear a report on COVID-19 response, as well as discuss and arrange 20 measures to further optimize epidemic prevention and control work. Xi Jinping presided over the meeting and delivered a speech.

The meeting called for “maximizing the protection of people’s lives and health, and minimizing the impact of the epidemic on economic and social development.” The meeting also called for “resolutely putting into practice the general strategy of ‘preventing both imported cases and domestic resurgences’ (外防輸入、內防反彈) and firmly pursuing the general policy of ‘dynamic zero-COVID,’” as well as “efficiently coordinating COVID-19 prevention efforts with economic and social development” to ensure “effective response to the epidemic, economic stability, and secure development.”

The meeting proposed to “further optimize and adjust epidemic prevention and control measures” while not slackening measures that are imperative. Officials should also “oppose a lack of responsibility” as well as “oppose and overcome pointless formalities and bureaucratism, and redress undesirable practices, such as taking excessive policy steps (層層加碼) or resorting to ‘one-size-fits-all’ (一刀切) approaches.” Officials were further instructed to “take substantial measures to meet the people’s basic living needs and ensure medical service and other basic services that concern their wellbeing,” including medical treatment.

Nov. 11
The State Council Joint Prevention and Control Mechanism Comprehensive Team released 20 measures to guide officials in “optimizing” epidemic prevention and control work:

1. Reduce centralized isolation time for close contacts to five days at a centralized facility and three days at home, as well as cut the number of nucleic acid tests from four to two.
2. No longer identify secondary close contacts (close contacts of close contacts).
3. People leaving high-risk areas will spend seven days in home isolation instead of seven days in a centralized quarantine facility.
4. Remove the “medium” risk category from the three categories of “high, medium, and low.” Homes, workplaces, and areas often frequented by infected persons will be considered high-risk, with all other areas being low-risk. High-risk areas should be mostly confined to residential units or blocks and cannot be extended at will. Areas with no new infections for five consecutive days will be reduced to a low-risk area and be promptly removed from lockdown.
5. Workers in high-risk positions who have completed closed-loop operations must spend five days at home, down from seven days at home or in a centralized quarantine facility.
6. Areas without outbreaks shall not expand the scope of nucleic acid testing.
7. Cancel the circuit breaker mechanism for inbound flights and reduce pre-flight 48-hour PCR testing from two to one.
8. Important business people and sports groups visiting the country will be allowed to move “point-to-point” in isolation-free areas under closed-loop management.
9. Set cycle threshold values at less than 35 to diagnose COVID-19 in new arrivals. Those who leave centralized isolation with cycle threshold values of between 35 to 40 will be subjected to a risk assessment; if they were previously infected, they will be subjected to home quarantine, take three tests in two days, be subjected to code management, and are forbidden from breaking quarantine.
10. Reduce quarantine for new arrivals to five days in a hotel and three at home, as well as cut the number of nucleic acid tests from four to two. Inbound personnel who have completed quarantine are not to be isolated again at their destination.
11. Increase healthcare resources, including hospital beds.
12. Promote vaccinations, especially boosters for the elderly.
13. Accelerate the stockpiling of drugs to treat COVID-19.
14. Strengthen the protection of key institutions and key populations.
15. Implement the “four earlies” (early detection, reporting, isolation, treatment) to reduce size and duration needed for pandemic control.
16. Intensify efforts to rectify the problem of “one-size-fits-all” approaches and excessive policy steps.
17. Strengthen service guarantees (supplies, medical care, etc.) for quarantined personnel. Officials are strictly forbidden to arbitrarily close schools and suspend classes, suspend work and production, block traffic without approval, adopt “silent” management, impose lockdowns, maintain lockdowns for extended periods, suspend outpatient services, or take other excessive policy steps.
18. Optimize epidemic prevention and control measures on school campuses.
19. Implement pandemic control measures in industrial parks to ensure smooth supply chain operations. During outbreaks, key enterprises vital for the overall industrial chain and people’s livelihoods cannot suspend production without authorization.
20.  Arrange orderly departures for people who are stranded during lockdowns. Destination areas shall not refuse to accept the return of stranded persons.

Nov. 12
Mi Feng, a spokesman of the PRC National Health Commission, said at a State Council press conference that the 20 optimization measures represent an “improvement” to the ninth version of CCP’s epidemic prevention and control plan. He added that the optimization measures do not represent a relaxation of prevention and control measures or “liberalization” and “laying flat” on “zero-COVID,” but are meant to “further enhance the scientific nature and precision of epidemic prevention and control measures.”

As an example, Mi Feng said that secondary close contacts are no longer identified because these people are extremely unlikely to get infected, but many have been subjected to epidemic prevention and control measures because of the practice. Thus in weighing the “lesser of two evils,” the PRC has decided not to trace secondary close contacts.

Property sector policy

Nov. 11
The People’s Bank of China (PBoC) and the China Banking and Insurance Regulatory Commission (CBIRC) issued a 16-point set of internal directives (關於做好當前金融支持房地產市場平穩健康發展工作的通知) to support the “stable and healthy development” of the property market.

The directives include:

1. Stabilize real estate development loans.
2. Support reasonable demands for personal housing loans.
3. Stabilize credit allocation for construction enterprises.
4. Support the reasonable extension (extension of one year beyond the original regulations) of development loans, trust loans, and other stock financing.
5. Keep bond financing basically stable.
6. Maintain stable financing for trusts and other asset management products.
7. Support development policy banks in providing special loans to ensure the timely delivery of presale homes.
8. Encourage financial institutions to provide matching financing support.
9. Provide financial support for mergers and acquisitions of real estate projects.
10. Actively explore market-oriented support methods.
11. Encourage independent negotiation of debt service extensions in accordance with the law.
12. Effectively protect the personal credit rights of those who defer payment on loans.
13. Extend the transition period arrangement of the real estate loan concentration management policy.
14. Phased optimization of merger and acquisition financing policies for real estate projects.
15. Optimize property rental and leasing credit services.
16. Broaden the diversified financing channels of the housing rental market.

The PBoC and CBIRC notice also stated that all real estate enterprises, be they state-owned or private, shall be treated equally under the 16 directives. Also, financial institutions or regulatory personnel who did their “due diligence” in helping developers secure loans for the completion of unfinished projects “may be exempt from liability” (已盡職的，可予免責) in the event that things do not turn out well (bad debts, projects remain uncompleted, etc.).

Nov. 14
The CBIRC, the PBoC, and the Ministry of Housing and Urban-Rural Development issued a notice (關於商業銀行出具保函置換預售監管資金有關工作的通知) that allowed property developers to access some presale housing funds.

The notice said that commercial banks can issue letters of guarantee to real estate companies for escrow presale housing funds, and the funds obtained by the property companies shall be prioritized to construct projects and repay debts. Real estate firms are banned from using the funds for land acquisition, new investment, or repayment loans by shareholders.

Yan Yuejin, the research director of the E-house Research Institute, said in an interview with the state-run Securities Times on Nov. 15 that the escrow funds allowed to be released account for about 10 percent of a property developer’s housing sales. That is, the funds in escrow now available to developers can be calculated per the formula “housing sales times 10%.”

Zhang Dawei, chief analyst at Centaline Property Agency, believes that the impact of the policy change is not big as not many property companies are qualified to access some presale funds. Zhang believes that state-owned property enterprises and a small number of private property developers will form the bulk of companies who stand to benefit from the policy.

2. Chinese real estate stocks soared after the PRC government’s release of its 16-point internal directives to support the “stable and healthy” development of the property sector. Hong Kong-listed shares of Country Garden, China’s largest real estate company, closed at HK$3.26, or up more than 45.5 percent. On the previous trading day (Nov. 11), Country Garden’s shares had closed at HK$2.24, or down more than 70 percent year-on-year.

OUR TAKE
1. Despite official propaganda, the CCP’s 20 measures to “optimize” epidemic prevention and control measures is a clear effort by Beijing to ease its “zero-COVID” policy. This is in line with our analysis on the topic of whether or not the Xi leadership will relax “zero-COVID” after the 20th Party Congress (see here, here, and here). Going forward, Beijing could take advantage of the World Health Organization downgrading the COVID-19 pandemic alert level in the future (or use its influence to secure this outcome) to declare victory over the virus and find a “scientific” excuse to reduce “zero-COVID” restrictions more broadly.

The language about “optimizing” epidemic prevention and control appears to be twofold. First, Xi is preserving his “zero-COVID” political legacy by keeping it on the books (just as we earlier analyzed) while repackaging the effort to move away from it as making “scientific” and “precise” improvements and refinements to the policy. Second, Beijing is signaling to local officials that the central government is serious about relaxing “zero-COVID” and that they should not operate in a contrary manner.

Concurrently, the Xi leadership indirectly expressed its concerns in the Politburo Standing Committee meeting on “optimizing” prevention and control measures about being self-sabotaged in its efforts to gradually move away from “zero-COVID. This is seen from Beijing’s warning about officials “lacking responsibility,” defaulting to “formalities and bureaucratism,” and engaging in other “undesirable practices” like taking excessive policy steps or “one-size-fits-all” approaches. Beijing’s concerns affirm our analysis that Xi Jinping’s ability to effectively move the regime away from “zero-COVID” will be hampered by the degree to which he can overcome systemic problems like “orders not leaving Zhongnanhai,” officials “preferring left rather than right,” and other bad habits in the officialdom that stem from Communist Party culture.

The deficiencies of the CCP’s autocratic system will inevitably lead to policy confusion and create new risks for the regime as officials go to extremes or display incompetence in adhering to the new “political correctness.” For example, some localities could drastically curb their epidemic prevention and control measures in the name of “optimization,” including sharply reducing the frequency and accessibility of nucleic acid testing. Local officials could even attempt to conceal or turn a blind eye to outbreaks, worsening the epidemic situation in China. Should things get out of hand, Beijing could be forced to reimpose strict “zero-COVID” measures again, undoing its current efforts to move away from the policy and causing even more policy confusion among officials.

On the other hand, some localities that do not want to be held responsible for the deterioration of local economies (it is vastly harder to secure political achievements by turning around the economy than it is to just “persevere with ‘zero-COVID’) and who are engaging in corruption with interest groups who benefit from tough epidemic prevention and control measures could persist with strict lockdowns under the guise of doing what is necessary to keep the virus at bay. This would give rise to supply chain and logistical problems as travel and production are restricted in some areas, and greatly discredit the central government’s effort to ease “zero-COVID.”

2. Xi has no choice but to begin relaxing “zero-COVID” so that the PRC can engage in meaningful diplomacy and reintegrate with the world (see SinoInsight 1), lower social tensions, and rescue the economy.

“Zero-COVID” has had a disastrous impact on the Chinese economy. In particular, draconian epidemic prevention and control has both shrunk and limited the consumption power of the Chinese people, as well as greatly reduced their ability and willingness to purchase property. This in turn worsens the already severe real estate sector debt crisis, which then affects the fiscal revenue of local governments and their ability to maintain grassroots operations.

The CCP’s latest economic figures offer a glimpse of the severity of the crisis. NBS data showed that the prices of new commercial housing in 58 of 70 medium- and large-sized cities fell month-on-month in October, along with the other bleak property figures listed above. Meanwhile, the PBoC’s financial data for October showed that loans to households decreased by 18 billion yuan from the previous month and fell 482.7 billion when compared with the same period in 2021. Of the total loans, medium- and long-term residential mortgages shrank significantly (down 388.9 billion yuan) from a year ago even though the October number was an increase (up 33.2 billion yuan) from September. Further, the scale of social financing increased by 907.9 billion yuan in October, or 709.7 billion less as compared to the same period in 2022.

Zhou Maohua, a macro researcher at China Everbright Bank’s financial market department, told mainland media that the reason for the decline in new credit and social financing includes short-term factors like recent COVID-19 outbreaks and the real estate downturn. He also noted that the “main contradiction” in the Chinese economy is a lack of domestic demand, as well as the suppression of the real estate sector and service industries.

“Zero-COVID” is also clearly greatly affecting China’s manufacturing sector. The plight of Foxconn in Zhengzhou—the world’s largest iPhone factory—is a case in point. After an outbreak of COVID-19 in early October, Zhengzhou Foxconn placed its workers under strict “closed-loop management.” The appalling conditions on the Foxconn campus drove many workers to disregard “closed-loop” quarantine and flee the facility near the end of October. Zhengzhou Foxconn then made several adjustments to its pay and benefits policy in November in a desperate bid to retain and attract workers. According to mainland media reports on Nov. 15, the factory had only recruited about 30,000 new workers, a far cry from its goal of signing up 100,000 people. The local authorities in Henan Province where Zhengzhou Foxconn is based reportedly also began tasking grassroots cadres with taking the lead in finding workers for the factory.

Beijing cannot afford more incidents like the one that happened at the Zhengzhou Foxconn campus to occur. Apple and other multinationals left frustrated by “zero-COVID” have already begun offshoring some of their mainland supply chains to India and other countries neighboring China. The growing exodus of manufacturers from the mainland is forcing the Xi leadership to more prominently ease “zero-COVID” and arrest a phenomenon that is worsening China’s rapid economic decline.

Finally, rising social tensions and public grievances over “zero-COVID” make it imperative for Beijing to move away from the policy. Chinese social media contains countless reports of incidents where residents under lockdown come to appalling and avoidable harm (people being unable to access medical treatment for ailments other than COVID-19, women in labor not being able to go to the hospital to give birth, people committing suicide or dying in their apartment due to the lockdowns, domestic violence cases, etc.) by the rigid enforcement of epidemic prevention and control measures. There are also more and more incidents involving violent clashes between angry residents and epidemic prevention personnel, as well as public security officers.

For example, demonstrations and violent clashes erupted in the villages of Datang and Kangle in Haizhu District, Guangzhou City on Nov. 14 after some communities in Tianhe District in Guangzhou began opposing the strict lockdown measures that were implemented after a recent outbreak. Many local workers broke down barricades and rushed through COVID-19 checkpoints as they took to the streets to protest and confront local public security personnel. A video circulating online showed that at least one person was bleeding profusely from the clashes. Meanwhile, a protester allegedly stormed into the Haizhu District government offices and was shot dead by the police, according to information circulating on Chinese social media.

In another example, a video circulating on Chinese social media showed an armored police car with the logo “Zhuzhou Special Police” printed on its side warning residents that armed patrols were being carried out in key areas of Yuetang Street in Zhuzhou City of Hunan Province. The police vehicle urged residents to “strictly abide by epidemic prevention regulations” and “not go out, not carry out visits, and not gather.” Other information circulating online noted that Zhuzhou had been placed under lockdown since Nov. 2 and several local epidemic prevention personnel had reportedly been stabbed and injured by angry residents.

3. Beijing’s efforts to ease financing restrictions for real estate companies are unlikely to do much to resolve the problem of unfinished projects or address the larger property sector debt crisis. China’s real estate sector crisis cannot be fixed in the short-term because it stems from deeper and intractable problems like a shrinking and aging demographic, the Xi leadership’s attempt to curb the financialization of the property sector, rapid economic deterioration, and weakening consumption power.

Worse, officials and property developers could exploit loopholes in the current regulation to transfer debt risks to the central government. For instance, financial institutions and real estate companies could conceivably conspire to covertly pay off the old debts of troubled developers by having state-run financial institutions—who “may be exempt from liability” should things go wrong with unfinished projects—issue loans to developers after claiming to have done their “due diligence.” Developers could then attempt various means to use those loans for functions other than completing projects, including paying off old debts. Ultimately, the central government will be held responsible for the problem of unfinished projects. Financial institutions previously leveraged regulation loopholes in 2020 by issuing low-interest “business loans” that the authorities meant for companies struggling from the pandemic to individuals who instead took the loans to purchase property.