On the Path to Pragmatism

“Short of a public health catastrophe, it’s hard to imagine that the Party will return to its zero-tolerance approach.”

-Andy Rothman, Investment Strategist

In the October 26 issue of Sinology, we wrote, “Now that the Party Congress is over, Xi Jinping has one big decision to make: return to the pragmatic policy path that made China rich and kept the Communist Party in power; or set a course for managing COVID and the economy that inhibits innovation and growth.” On November 11, Xi signaled that he has chosen pragmatism.

On that day, Xi’s government published a list of 20 measures designed to “optimize” mitigation of COVID, marking a significant change in direction of policy towards living with the virus and away from zero tolerance for cases. This more pragmatic path will be bumpy and implementation may stray off course during the winter as cases rise and local officials struggle with the new direction. Lockdowns and other obstacles to normal life will continue to appear in the coming months before ending in the spring. The need to vaccinate many millions of older people is also a challenge. But, short of a public health catastrophe, it is hard to imagine that the Party will return to its zero-tolerance approach, especially since the 20 measures were published under Xi’s name.

The change in direction of COVID policy has been accompanied by new government measures to support recovery of the property sector in what appears to be a coordinated effort to restore consumer confidence and jumpstart one of the most important parts of the economy.

It will take time for China’s economy to recover from the depths of zero-COVID but the new measures together with steps to help real estate boost significantly my level of confidence that Xi has made his one big decision and has chosen the pragmatic path I’ve been expecting.