Heading into 2022, some things were foreseeable: President Xi Jinping’s appointment to a third term at the October Communist Party Congress was all but assured, U.S.-China relations were bound to remain rocky, and a real estate crisis would continue to grip the nation.
But the main story of the year — China’s draconian zero-covid policy — was just beginning to take hold; few predicted how it would upend life for millions of Chinese people. And even fewer foresaw that China would — as a result — be hit with its most widespread protests in years.
Now, on the precipice of 2023, one thing is clear — how China handles the messy unwinding of zero-covid looks to be the most profound question facing the country as new year begins. Almost everything else, from the fate of the economy to the future of climate action, hinges to some degree on how smoothly — or not — the government and the nation move from harsh restrictions to a true reopening.
Our list leaves out key topics — from U.S.-China relations to potential breakthroughs on technologies like electric vehicle batteries and semiconductors — but it covers core questions involving the pandemic, internal politics and China’s economic growth (or lack thereof). The answers to these questions will have major reverberations in China, and they may well have impact all over the world.
1. How will China manage its way out of zero-covid?
As the rest of the world has seen with omicron, you give an inch and the virus takes a mile; in the final days of 2022, covid cases have soared across Beijing and many other large cities. The spike that the government insisted for three years had to be prevented at all costs has finally come. And as Grid has reported, experts fear that the healthcare system may not be able to withstand the sudden surge.
To some extent, then, this question is both critical and relatively easy to answer: The transition out of zero-covid is likely to be chaotic at best.
For one thing, experts say the current surge is just the beginning. “The peak time hasn’t arrived; many of the hospitals have reached their capacity, but the worst is yet to come,” Yanzhong Huang, senior fellow for global health at the Council on Foreign Relations, told Grid.
China’s population is more susceptible to the virus because so few people have been infected, and China’s weaker vaccines don’t offer the same level of protection as the mRNA shots used in the U.S. And while the Chinese government has directed hospitals to boost ICU capacity by the end of December, many experts told Grid that hospital beds and staffing will likely fail to meet the needs.
A period of particular concern will come early in 2023: Chinese New Year, the country’s most important holiday, which starts on Jan. 21. During the holiday, hundreds of millions of people typically travel home to spend time with family. It’s been a scaled-down celebration for the last three years; the loosening of restrictions means all that pent-up travel could prove to be a nationwide superspreader event, accelerating the transmission of the virus and bringing it to vulnerable rural areas where China’s healthcare system is even weaker.
How bad might things get? Public health experts have published a range of estimates.
“I think we’ll see astronomical case numbers,” Jennifer Bouey, an epidemiologist and leader of China policy studies at the Rand Corporation, told Grid. A study published in Nature Medicine earlier this year projected 1.6 million deaths over six months, if restrictions were lifted. More recent modeling from U.K. health analytics firm Airfinity projects a higher number — 1.3 to 2.1 million deaths over three months, if China’s outbreaks mirror Hong Kong’s lethal wave from last spring.
It’s a nightmare scenario that could have ripple effects well beyond China’s public health — the nation’s economic growth and perhaps even Xi’s leadership could be called into question if things take that bad a turn.
As dark as the next few months look, experts also note a possible silver lining — the idea that the easing of zero-covid might offer a light at the end of the tunnel for people in China — a return to something resembling life pre-2020.
“This could be the worst time for China, but if China manages to muddle through the crisis,” said Huang, “we will see that China will learn to live with the virus, the economic recovery will be speedy and you’re going see impressive economic growth, the social and economic life will be returned to normal.”
That’s the hope.
2. Will China’s economy recover?
Just how speedy might the economic recovery be? That’s the next big question for China in 2023 — and as Huang suggests, the answer is directly related to the zero-covid questions.
Zero-covid has been a well-documented drag on the economy over the past year; factories suffered when their workers were locked down, and Chinese consumers reined in their spending as they lost paychecks and jobs. GDP growth will clock in at around 3 percent for 2022, well short of the 5.5 percent target policymakers had originally set.
The hope here is that the easing of lockdowns and other restrictions will unleash the Chinese economy once more. The Wall Street Journal reported last week that a Politburo official is drawing up plans for a GDP target above 5 percent in 2023; the official goal won’t be announced until the National People’s Congress meets in March.
But some international financial institutions are less sanguine. The World Bank recently projected 4.3 percent GDP growth for China in 2023, reflecting the potential impact of the growing covid wave on the Chinese economy.
Experts Grid spoke with echoed those concerns. “Reopening is very much underway now, but recovery won’t come right away,” said Tianlei Huang, a research fellow at the Peterson Institute for International Economics. A key question, Huang and others said, is how much Chinese consumers are willing to spend after years in hibernation.
In 2023, the government will be looking to consumers as a critical driver of growth, but people across China remain shaken after a year of uncertainty and lost paychecks; even if the covid wave doesn’t follow the worst-case scenarios, it might take time for consumers to start traveling and shopping again.
“Across the whole year, [reopening] is definitely better than continuing to enforce zero-covid over a longer period of time,” Logan Wright, a partner at Rhodium Group, told Grid. “But it’s not at all clear, exactly, for the broader economy, whether people are still going to be more interested in spending versus just, you know, a little more concerned about the economic outlook in the future as well.” To assess the potential strength of consumer spending, Wright said he’ll be looking at the level of government support to revive consumption, including providing coupons and subsidies directly to consumers.
Consumer habits in 2023 are particularly important because other key engines of the Chinese economy are likely to underperform. Given the economic issues in the U.S. and other countries, exports from China — which turbocharged the economy in 2021 — are looking weak heading into the new year.
Meanwhile, China’s property sector, which has historically accounted for about a quarter of GDP, is also still likely to be “a very meaningful headwind to growth in 2023,” Wright said. Ever since heavily indebted real estate giants like Evergrande defaulted last year, Chinese developers have been using their limited liquidity to finish projects that were already underway rather than starting new ones. The government has walked a fine line — trying to soften the property downturn by providing more credit to developers without adding more fuel to the sector’s debt crisis. Experts expect the property market to continue lagging.
“This is a long-term unwinding of a very, very long-lasting credit bubble,” Wright said. A big question for 2023, he added, will be whether the property sector defaults lead to broader issues throughout the financial system — one more nightmare scenario that economists have feared for many years.
All these issues aren’t just questions for investors and companies; they come after a year of rising income inequality and record-high unemployment among China’s youth. Millions of Chinese are hoping for an economic shot in the arm.
3. Will Xi Jinping’s hold on power weaken?
Not long ago, it would have seemed strange to even include this question. Before the November protests, Xi’s control appeared unassailable. Only a month earlier, at October’s Communist Party Congress, he was granted another term as party chief and placed new leaders on the Politburo Standing Committee, the inner circle of top party officials. All those new leaders are considered deeply loyal to Xi.
Then came the protests — unprecedented during his reign in terms of their geographic breadth, and also remarkable for what some of the protesters were saying. Along with calls for an end to the covid lockdowns, there were people in the streets shouting “Xi Jinping step down!”
By agreeing to the protesters’ main demand — an end to zero-covid — it appears that Xi has quieted the grassroots opposition for now. But some experts said Xi might have been too hasty in answering the protesters — shifting gears too dramatically; in this view, Xi may have incorrectly believed that the economic benefits of reopening — even a poorly planned reopening — would outweigh the costs.
“The issue for me is whether Xi may have badly overestimated the public’s dissatisfaction with covid-zero and underestimated the public’s fear of covid,” said Andrew Wedeman, director of the China studies department at Georgia State University. “My hunch is that he will certainly suffer if the number of deaths is anywhere near the numbers being batted about right now.”
Xi may suffer reputational damage in the eyes of the public, but Wedeman and other experts said that even a botched pivot away from zero-covid — and the perception that the party is to blame — still may not lead to immediate political consequences for him.
In all likelihood, Xi will secure the role of president at the National People’s Congress in March — it’s an almost predetermined outcome — and no major schisms among the party’s top leaders will be publicly apparent. “There is a possibility that Xi’s people may have some type of divisions among themselves, but they are all very loyal to him,” Suiseng Zhao, a professor of Chinese politics at University of Denver, told Grid. “So that will not threaten Xi Jinping’s power foundation, at least I mean by next year.”
4. Will protesters take to the streets again?
Experts in Chinese politics are divided as to whether dissatisfaction with Xi and the post-zero-covid reopening might lead to more protests in 2023.
Several cited a recent crackdown on protesters as reason to believe that further large-scale dissent is unlikely. After the November protests erupted, police began randomly searching people’s phones for VPNs and blocked apps, like Telegram, that protesters had used to communicate. An unknown number of demonstrators were detained and questioned; some are still being held.
“I think the government is likely to double down on punishment should there be more protesters in the coming year,” Yaqiu Wang, senior China researcher at Human Rights Watch, told Grid.
Beyond the repression, there is the simple if profound fact that the protesters’ mission has been accomplished to a large degree. That could cut two ways.
On the one hand, given their success and the repression, “it would really be the rare young person or migrant laborer who would now come out on the street,” Susan Shirk, a research professor at the University of California, San Diego, said during a recent Foreign Policy event.
But James Palmer, deputy editor at Foreign Policy, argued that a major healthcare failure during the coming surge could tip off another round of public anger against the government.
And Victor Shih, an associate professor of political economy at the University of California, San Diego, said that the November experience may embolden others. “Now that the protesters know sympathizers are out there, they’re going to be much more willing,” he told the New Yorker. “Even the people who are being detained right now [will] get let go at some point. They’re going to do it again when the next crisis emerges. I think we will see more frequent protests, with political demands, across cities, which is something that we haven’t seen since 1989.”
5. Will China make progress on addressing climate change?
With the turbulence of the last year, from lockdowns to protests to economic troubles, climate action took something of a back seat in China in 2022. If zero-covid led to greater economic problems, those problems in turn led to backsliding on key targets, including a proposed deadline to peak emissions from the carbon-intensive building materials industry by 2025, which was pushed back to 2030.
“China has suffered so much uncertainty over the recent months,” Li Shuo, global policy adviser at Greenpeace East Asia, told Grid, “much of it related to its covid situation. This has an impact on all aspects of life, including the country’s climate agenda.”
The silver linings, when it comes to climate change? The economic slowdown means China’s emissions will likely have fallen slightly in 2022, and China will probably hit a record in terms of newly installed solar energy capacity this year — no small achievement.
Looking ahead, China’s 2023 climate outcomes will rest on the nation’s covid trajectory and economic recovery. As Li said, “How soon the country will get back to normal will determine when attention will get back to the environmental agenda.”
Climate watchers have been heartened lately by the government’s messaging during a recent economic planning meeting, which suggested that the recovery will be driven by consumption; growth spurred by consumption and services carries a lower carbon footprint compared with China’s traditional approach of relying on construction and heavy manufacturing to boost growth. The latter tends to send CO2 emissions soaring.
“I’m cautiously optimistic about that,” said Lauri Myllyvirta, lead analyst at the Center for Research on Energy and Clean Air. Meanwhile, signals from the meeting point to another good year for electric vehicle sales, which are expected to finish at a record high in 2022. Myllyvirta was also upbeat about the potential for another banner performance for solar and wind installations. “I think we’ll see another record or near-record year,” he said.
But overall, the planning meeting suggested that climate change won’t be in the spotlight. “Energy security and economic stability will be the main priorities, not leaving much room for climate policy,” Yan Qin, lead carbon analyst at Refinitiv, told Grid.
And thorny questions remain — not least whether China will start to phase out coal and make its power grid more flexible to handle solar and wind energy. The bottom line is that the Chinese government still has a lot of runway left: It has only pledged to start reducing coal consumption between 2025 and 2030, and to begin reducing overall emissions by 2030. Climate experts say that emissions could peak and begin to decline well before then — an imperative for the world to meet the Paris Agreement climate targets. Among many crucial questions for China in 2023, how the country moves toward those goals is the one that will ultimately have the most impact on the rest of the world.
Cleo Li-Schwartz contributed reporting. Thanks to Lillian Barkley for copy editing this article.