WEBVTT - The Covid Protests in China and Why They Happened Now 0:00:10.360 --> 0:00:14.320 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.400 --> 0:00:18.599 I'm Joe Wisn'tal, and I'm Tracy Halloway. So, Tracy, obviously, 0:00:18.800 --> 0:00:21.640 a lot of the images in videos that we've seen 0:00:21.800 --> 0:00:23.880 out of China over the last week, I mean, I 0:00:23.920 --> 0:00:27.880 think it's safe to say they're pretty extraordinary, absolutely incredible. 0:00:28.000 --> 0:00:29.840 So I remember, I guess it might have been a 0:00:29.880 --> 0:00:33.640 month or two ago someone posted a sign in Beijing 0:00:33.680 --> 0:00:37.920 that was critical of the party leadership and the COVID restrictions, 0:00:38.280 --> 0:00:42.040 and that alone had like, you know, just d reams 0:00:42.159 --> 0:00:45.839 of ink spilled over this one sign that managed to 0:00:45.840 --> 0:00:47.880 be put up in Beijing, and it stayed there for 0:00:47.920 --> 0:00:51.519 a little while. But now we have these protests that 0:00:51.560 --> 0:00:55.120 have erupted in a number of Chinese cities everywhere from 0:00:55.120 --> 0:00:59.680 Beijing to Shanghai and other places, where people are marching 0:00:59.680 --> 0:01:03.400 in this streets, they're holding up multiple signs, and the 0:01:03.440 --> 0:01:07.080 extraordinary thing is that this has been allowed to happen 0:01:07.160 --> 0:01:10.880 at all, allowed to happen, and also the people in 0:01:11.040 --> 0:01:15.280 many of these cases are almost certainly taking huge personal risks. 0:01:15.319 --> 0:01:19.160 There have been some videos of people calling for you know, 0:01:19.440 --> 0:01:23.640 j and Ping to resign, and my understanding of China 0:01:23.840 --> 0:01:26.840 is that that is the type of public comment that 0:01:26.880 --> 0:01:30.720 could get one in very serious legal jeopardy. Absolutely, so 0:01:31.040 --> 0:01:33.920 this is a fascinating moment in Chinese history. It's a 0:01:33.920 --> 0:01:37.440 fascinating moment from an economic perspective as well, because, of 0:01:37.440 --> 0:01:41.160 course China is the world's second biggest economy. It has 0:01:41.200 --> 0:01:45.800 had a number of quite stringent COVID related restrictions over 0:01:45.840 --> 0:01:49.040 the past three years or so, and unlike other countries, 0:01:49.080 --> 0:01:52.680 it hasn't really eased up all that much. And so 0:01:52.720 --> 0:01:56.800 we're seeing this ground swell of populist anger and a 0:01:56.840 --> 0:01:59.880 lot of criticism over the way the party and specifically 0:02:00.280 --> 0:02:04.160 Shi shin Ping, has actually handled this whole situation, right. 0:02:04.200 --> 0:02:07.640 I mean, we're coming on, you know, almost three years 0:02:07.720 --> 0:02:11.120 now of COVID zero. I first heard of COVID in 0:02:11.320 --> 0:02:15.600 you know, it's a December here we are. We're recording 0:02:15.600 --> 0:02:21.799 this episode November. It's coming out in December, and uh, 0:02:21.840 --> 0:02:25.240 you know, this is extraordinary long time to have life 0:02:25.320 --> 0:02:29.480 disrupted in a very extreme way. Of course, the tightness 0:02:29.600 --> 0:02:32.840 of the lockdowns has sort of waxed and waned at times, 0:02:32.840 --> 0:02:36.480 but it's pretty extreme. In many cases. The efforts to 0:02:36.560 --> 0:02:38.960 contain COVID have been quite your cony in and as 0:02:39.000 --> 0:02:43.040 you say, the economic situation was already not that great. 0:02:43.240 --> 0:02:46.320 Growth is poor. Earlier this year we talked about a 0:02:46.320 --> 0:02:49.919 lot of the problems facing the real estate industry. We also, 0:02:50.000 --> 0:02:53.240 of course recently had the Party Congress, so an extraordinary 0:02:53.280 --> 0:02:56.600 moment for China in general right now. Yeah, and since 0:02:56.639 --> 0:02:59.040 you mentioned the Party Congress, you know, I think there 0:02:59.240 --> 0:03:03.040 was an expctation that maybe after this big political event 0:03:03.200 --> 0:03:05.920 was out of the way, after all the attention that 0:03:06.040 --> 0:03:09.920 had been turned on Shesh and paying basically securing leadership 0:03:09.960 --> 0:03:13.320 for life, that after that had passed, maybe some things 0:03:13.320 --> 0:03:16.080 would start to change, maybe some of the restrictions would 0:03:16.080 --> 0:03:18.840 be eased up a bit. That doesn't seem to have happened, 0:03:19.000 --> 0:03:21.440 and so well, there have been some other things that 0:03:21.480 --> 0:03:24.720 have happened in the interim, including a fire in a 0:03:24.840 --> 0:03:28.360 room she where people have criticized the government as having, 0:03:28.520 --> 0:03:31.320 you know, because of the COVID restrictions on this building, 0:03:31.360 --> 0:03:35.520 people were unable to escape, and I think ten people 0:03:35.600 --> 0:03:38.520 were reported to have died in that fire. That's the 0:03:38.600 --> 0:03:42.000 thing that's sort of sparked all of this. But it is, 0:03:42.160 --> 0:03:46.680 as you say, the result of three years of major, 0:03:46.800 --> 0:03:50.120 major disruptions to people's lives, right, and you mentioned, you know, 0:03:50.160 --> 0:03:52.760 there may have been some people might have thought, Okay, 0:03:52.760 --> 0:03:55.760 after the Party Congress, then the government can ease up, 0:03:55.800 --> 0:03:59.160 perhaps on COVID restrictions. But you know, we talked about 0:03:59.160 --> 0:04:01.920 this with Dan walk There is still the sort of 0:04:02.280 --> 0:04:07.760 brutal math for China of limited healthcare capacity, limited hospital beds, 0:04:07.960 --> 0:04:12.560 limited success in a mass vaccination and opening up means 0:04:12.560 --> 0:04:15.160 a lot more people will die. And when the government 0:04:15.200 --> 0:04:17.640 has sort of made a point about the success it's 0:04:17.680 --> 0:04:21.440 had in containing COVID, particularly compared to the rest of 0:04:21.480 --> 0:04:24.080 the world, that is a choice the government doesn't want 0:04:24.080 --> 0:04:27.280 to make. Well, I mean, the term painting yourself into 0:04:27.279 --> 0:04:29.560 a corner kind of springs to mind. And of course 0:04:29.600 --> 0:04:32.280 the big question is what can China do now. It's 0:04:32.320 --> 0:04:36.320 tied a lot of its political legitimacy to keeping people alive, 0:04:36.400 --> 0:04:39.400 which means you have to have these COVID restrictions. So 0:04:39.520 --> 0:04:42.760 what can it do in the face of mass unrest? 0:04:42.920 --> 0:04:45.680 So we really do have the perfect guest to talk 0:04:45.720 --> 0:04:48.120 about this today. Absolutely, we are going to be speaking 0:04:48.120 --> 0:04:50.600 with Victor she He is a professor at the School 0:04:50.640 --> 0:04:54.000 of Global Policy, and strategy at you see San Diego, 0:04:54.160 --> 0:04:56.359 and he is also the author of the new book 0:04:56.720 --> 0:04:59.400 Coalitions of the Week. Victor, thank you so much for 0:04:59.480 --> 0:05:02.719 coming on, Thank you for having me, Joe and Tracy. Well, 0:05:02.800 --> 0:05:05.040 why don't we just start with the sort of big 0:05:05.080 --> 0:05:09.280 picture question, which is how extraordinary from your perspective are 0:05:09.320 --> 0:05:12.640 the protests that we've seen across the country. This has 0:05:12.680 --> 0:05:17.440 been very, very extraordinary in that these are in person, 0:05:17.640 --> 0:05:22.440 on the street protests across multiple major cities of China, 0:05:22.520 --> 0:05:24.559 and this is really something that we have not seen 0:05:25.200 --> 0:05:30.000 since so so this is very very striking. Indeed, So 0:05:30.120 --> 0:05:32.040 this is actually one thing I wanted to ask you, 0:05:32.040 --> 0:05:35.000 which is there is a perception that you know, in 0:05:35.160 --> 0:05:41.760 China it doesn't tolerate any descent, but historically, over vast 0:05:41.839 --> 0:05:46.360 periods of time, we have had certain protest movements, you know, 0:05:46.600 --> 0:05:51.320 student unrest or maybe laborers or farmers. Can you sort 0:05:51.360 --> 0:05:54.840 of put what we're seeing now in a historical context? 0:05:55.000 --> 0:05:57.520 What is this actually remind you of or are there 0:05:57.560 --> 0:06:03.400 historical analogies or parallels that can reach to to explain this. Yeah, So, 0:06:03.440 --> 0:06:06.000 as you point out, indeed, even though in the major 0:06:06.080 --> 0:06:09.000 cities we have not seen major protests for quite a 0:06:09.080 --> 0:06:13.440 number of years. There are protests, sit ins, even riots 0:06:13.480 --> 0:06:16.680 that take place all the time in China. According to 0:06:16.760 --> 0:06:20.440 statistics that we, you know, as outsiders, were able to 0:06:20.440 --> 0:06:23.280 gather from a few years ago, there are tens of 0:06:23.320 --> 0:06:28.039 thousands of protests across China. But nonetheless, the vast majority 0:06:28.080 --> 0:06:31.919 of protests up until recent days have taken place in 0:06:32.080 --> 0:06:35.680 rural areas, smaller cities, maybe medium sized cities. In a 0:06:35.680 --> 0:06:38.719 couple of cases, they have tended to you know, really 0:06:38.800 --> 0:06:43.080 focused on grievances that are very local, like land seizures, 0:06:43.680 --> 0:06:47.040 like benefits that people are not receiving, like a local 0:06:47.200 --> 0:06:49.840 abuse of power by the police forces. What we are 0:06:49.920 --> 0:06:55.440 seeing today instead as a multi city protests in some 0:06:55.480 --> 0:06:58.679 of the largest and politically most important cities in China, 0:06:58.800 --> 0:07:02.919 like Shanghai, like Beijing, and the slogans at least of 0:07:03.000 --> 0:07:07.040 the protesters are not very specific. There are very general 0:07:07.240 --> 0:07:13.200 slogans calling for constitutional reform, calling for democracy, calling for freedom, 0:07:13.960 --> 0:07:16.840 as well as the downfall of the Chinese leadership. So 0:07:16.840 --> 0:07:19.840 so that's that's uh, you know, very striking and something 0:07:19.840 --> 0:07:22.560 that we haven't seen for decades. So I mentioned in 0:07:22.600 --> 0:07:25.760 the intro that my perception is that anyone engaging in 0:07:25.800 --> 0:07:30.360 these protests is potentially taking big personal legal risk. What 0:07:30.560 --> 0:07:33.040 is the law? What? What what does it say about 0:07:33.480 --> 0:07:36.000 whether you can go out and protest or call for 0:07:36.240 --> 0:07:38.560 she shouldn't pink to step down? Is it against the 0:07:38.600 --> 0:07:42.600 law to do this? Uh so? Of course, constitutionally, Chinese 0:07:42.680 --> 0:07:48.000 citizens have the freedom of speech and the freedom of assembly. However, 0:07:48.120 --> 0:07:50.200 both in the constitution and also in the number of 0:07:50.200 --> 0:07:54.239 regulations and laws, any subversion of the Chinese Communist Party 0:07:54.440 --> 0:07:58.840 is considered illegal, and of course calling for the downfall 0:07:58.880 --> 0:08:02.080 of the you know, leadership of the Chinese Communist Party 0:08:02.080 --> 0:08:04.880 would would be with fall of foul of these regulations 0:08:04.880 --> 0:08:10.200 and laws, right, and everything is always open to significant interpretation, 0:08:10.400 --> 0:08:12.280 or at least you know, that seems to have been 0:08:12.320 --> 0:08:14.720 the case in Hong Kong with the National Security Law. 0:08:14.760 --> 0:08:17.520 It's kind of like it's vague enough that if you 0:08:17.600 --> 0:08:22.200 do something that upsets the party or the leadership that 0:08:22.240 --> 0:08:25.680 they can crack down on you. But this leads into 0:08:25.720 --> 0:08:30.880 another question, which is why are these protests being tolerated 0:08:31.520 --> 0:08:35.640 right now? Because, as as you point out, these are 0:08:35.920 --> 0:08:43.120 pretty big demonstrations with what would be very inflammatory slogans 0:08:43.200 --> 0:08:46.600 and language for the Communist Party, things that are very 0:08:46.600 --> 0:08:49.400 critical of She and Ping, calling for democracy and human 0:08:49.480 --> 0:08:53.160 rights and freedom. Why are these being allowed to happen? 0:08:53.679 --> 0:08:56.440 My read of it is is very tactical so far. 0:08:56.720 --> 0:08:59.720 In fact, today we've seen a lot of tightening up. Uh. 0:08:59.800 --> 0:09:03.920 You have to remember that since the Chinese government, of 0:09:03.960 --> 0:09:07.240 course has not been standing still, they've been doing an 0:09:07.320 --> 0:09:11.720 incredible amount of research, looking at experiences overseas, looking at 0:09:11.760 --> 0:09:17.600 domestic cases of disturbances, and really trying to engineer the 0:09:17.640 --> 0:09:21.719 best response to protest movements over time. And I think 0:09:21.760 --> 0:09:24.400 one of the lessons that they've learned is that if 0:09:24.600 --> 0:09:27.520 you know, there really is a high level of dissatisfaction, 0:09:27.559 --> 0:09:29.240 which is you know, which is the case here in 0:09:29.360 --> 0:09:32.200 China after three years of lockdown there, there is indeed 0:09:32.240 --> 0:09:35.559 a very high level of dissatisfaction among the people. At 0:09:35.600 --> 0:09:39.040 the first sign of trouble, you crack down using very 0:09:39.080 --> 0:09:44.800 bruto forces that could invite backlash protests. Uh. And I 0:09:44.840 --> 0:09:48.679 think they tactically allow, you know, at least for one 0:09:48.800 --> 0:09:51.960 or two day period for people around China to protests, 0:09:52.040 --> 0:09:54.000 to even post things online. I mean, one of the 0:09:54.040 --> 0:09:56.800 puzzles is, you know, why are they able to post 0:09:56.840 --> 0:09:59.720 things online and even you know, retweet them and so 0:09:59.760 --> 0:10:01.960 and so. Fourth part of it could be tactical. Today 0:10:02.000 --> 0:10:06.360 we have certainly seen today a lot more tightening, a 0:10:06.440 --> 0:10:10.520 lot greater police forces. It does take time for the 0:10:10.559 --> 0:10:15.600 police to deploy, get organized, to figure out a coherent response. 0:10:16.040 --> 0:10:18.880 I think kind of the extent and the scale of 0:10:18.880 --> 0:10:22.079 the protests also has been very surprising even to the authorities. 0:10:22.320 --> 0:10:41.880 Today we're seeing a more coherent response. So I guess 0:10:41.880 --> 0:10:49.200 another question is why now why in November December. Obviously 0:10:49.440 --> 0:10:52.560 the COVID zero lockdowns have been you know, happening for 0:10:52.760 --> 0:10:58.079 almost three years uninterrupted, But why now, Yeah, So the 0:10:58.760 --> 0:11:00.719 immediate trigger, of course, is you point out, is the 0:11:00.800 --> 0:11:05.440 fire in Urumchi. But one of the potential trigger for 0:11:05.600 --> 0:11:08.800 that event as well if other events we've seen online 0:11:09.400 --> 0:11:13.080 where the neighborhood committees have barred people in their homes 0:11:13.280 --> 0:11:16.040 and not let them leave their homes, sometimes with very 0:11:16.120 --> 0:11:20.440 draconian measures like you know, putting like a rebar across 0:11:20.520 --> 0:11:24.080 people's doors and so and so forth. That was triggered 0:11:24.080 --> 0:11:27.320 by a relaxation of COVID policy that was announced on 0:11:27.360 --> 0:11:31.600 November eleven. So part of that relaxation was to switch 0:11:31.720 --> 0:11:35.880 from a seven day offsite quarantine in one of these 0:11:35.920 --> 0:11:41.200 giant quarantine warehouses, Uh, switch it into fewer days of 0:11:41.280 --> 0:11:44.720 that to five days, but then more days of mandatory 0:11:45.000 --> 0:11:49.480 in home quarantine. But for the local authorities, whose resources 0:11:49.480 --> 0:11:53.480 are extremely stretched already, they took shortcuts. And he's like, well, 0:11:53.480 --> 0:11:55.040 how do we make sure that people don't leave their 0:11:55.080 --> 0:11:58.280 homes when they're supposed to. Let's put a rebar across 0:11:58.320 --> 0:12:00.720 the door to make sure the door that's doesn't open. 0:12:00.800 --> 0:12:03.680 In some of the wealthier localities like Shanghai, they've put 0:12:03.720 --> 0:12:07.400 electronic monitors outside of people's doores to to monitor whether 0:12:07.520 --> 0:12:11.680 doors get open. That's that's a bit more humane. But 0:12:11.920 --> 0:12:14.320 in some of these poor localities they have resorted to 0:12:14.800 --> 0:12:18.560 some very crude measures um and that you know, certainly 0:12:18.920 --> 0:12:22.680 has pushed people's level of frustration and anger over the 0:12:22.840 --> 0:12:26.240 edge in many cases. So so ironically, I think it 0:12:26.520 --> 0:12:30.440 partly was triggered by this relaxation of COVID policies, which 0:12:30.840 --> 0:12:33.360 you know, people were right after the twenty Party Congress 0:12:33.400 --> 0:12:36.959 that there has been some relaxation. So for foreigners traveling 0:12:37.000 --> 0:12:40.160 to China, they don't have to quarantine for as many days. 0:12:40.160 --> 0:12:43.480 They don't have to test us often, et cetera. So 0:12:43.679 --> 0:12:47.120 just on this note, I mean historically, when there happened 0:12:47.160 --> 0:12:52.520 protests in China, one of the playbooks that gets trotted 0:12:52.520 --> 0:12:56.440 out very very quickly by the ruling party is blame 0:12:56.559 --> 0:13:01.360 for an influence and blame local officials for bungling you know, 0:13:01.520 --> 0:13:04.920 Beijing's Grand Plan. The plan was fine, but the local 0:13:04.920 --> 0:13:08.120 officials just implemented it poorly and it's all their fault. 0:13:08.800 --> 0:13:11.040 Is that a? Is that the kind of thing we're 0:13:11.040 --> 0:13:13.520 going to see here? Is that the playbook that we're 0:13:13.520 --> 0:13:17.280 going to see and then be do local officials deserve 0:13:17.480 --> 0:13:21.559 some of the blame here? Yeah? So we are seeing 0:13:21.559 --> 0:13:27.080 today some commentaries not from official Chinese government websites yet, 0:13:27.120 --> 0:13:30.760 but certainly unofficially they have a lot of influencers, let's 0:13:30.760 --> 0:13:34.360 just say online they are saying no foreign hostile forces 0:13:34.400 --> 0:13:38.400 are behind these protests. Of course, that's ridiculous because there 0:13:38.400 --> 0:13:42.079 are no foreigners left in China after three years of lockdown. 0:13:42.720 --> 0:13:45.120 The number of foreigners in China you know, have been 0:13:45.160 --> 0:13:49.079 cut by or something like that. So even if foreign 0:13:49.120 --> 0:13:52.319 hostile forces would like to you know, do something that 0:13:52.440 --> 0:13:55.760 they literally cannot do it in terms of local officials 0:13:55.840 --> 0:13:57.880 I think. You know, of course they bear some of 0:13:57.920 --> 0:14:01.199 the blame because some very prudent meass have been implemented 0:14:01.240 --> 0:14:06.800 by them. But for local level community workers, remember, you know, 0:14:06.840 --> 0:14:09.960 at the grassroots level, the Change governments that they have 0:14:10.480 --> 0:14:13.720 something called residential committees. But these are not people who 0:14:13.800 --> 0:14:18.199 are fully paid for by the Chinese governments, oftentimes their retirees. 0:14:18.760 --> 0:14:21.960 They get a very modest stipend a few hundred dollars 0:14:22.000 --> 0:14:23.840 a month, but they don't get the full pay and 0:14:23.920 --> 0:14:26.840 benefits of Chinese government officials. But for the past three 0:14:26.920 --> 0:14:31.280 years they have been the main force implementing public policies 0:14:31.280 --> 0:14:36.120 in China, you know, instituting the lockdown, doing testings, delivering 0:14:36.200 --> 0:14:41.320 food and sometimes even social services to distressed households. There 0:14:41.320 --> 0:14:44.080 are stretched to the brink um, you know, the Change 0:14:44.120 --> 0:14:47.920 government transfer some resources to the local level. There's there's 0:14:47.960 --> 0:14:52.040 free food for these community workers. Sometimes there there's bonus pay. 0:14:52.080 --> 0:14:55.000 But also the other factor is that at the local 0:14:55.080 --> 0:14:57.520 level local governments they don't have a lot of money. 0:14:58.120 --> 0:15:01.920 Revenue is down close to ten percent at the local level, 0:15:02.480 --> 0:15:06.040 and even civil service pay is being cut much less 0:15:06.080 --> 0:15:09.760 the pay of these community level workers, so they're stretched 0:15:10.160 --> 0:15:15.600 beyond other initial capacity, and one can understand why they 0:15:15.640 --> 0:15:20.280 take shortcuts when they're asked to institute very onerous you know, 0:15:20.400 --> 0:15:22.920 to the new policies, you know, really ask a lot 0:15:22.960 --> 0:15:25.760 of them because they have to track at the household 0:15:25.840 --> 0:15:28.880 level who's supposed to stay at home, who's who has 0:15:28.920 --> 0:15:32.440 a freedom of movement, and that's just not something they 0:15:32.440 --> 0:15:35.840 have the capacity to do in many cases. So this 0:15:35.920 --> 0:15:38.120 leads into something else that I wanted to ask you, 0:15:38.200 --> 0:15:40.440 And I love this conversation because it's one of those 0:15:40.480 --> 0:15:43.160 where you you answer something and then I immediately have 0:15:43.360 --> 0:15:47.400 like five other questions. But just on this note, I 0:15:47.440 --> 0:15:51.760 think people outside of China maybe don't necessarily appreciate how 0:15:51.840 --> 0:15:55.960 much manpower it actually takes to have these kinds of 0:15:56.000 --> 0:15:58.800 COVID restrictions, where you know, if you're in a big 0:15:58.840 --> 0:16:01.600 apartment building, there is a group of people who are 0:16:01.680 --> 0:16:04.680 charged with making sure that people aren't going in and 0:16:04.680 --> 0:16:06.960 out when they're not allowed to, and that people are 0:16:07.000 --> 0:16:09.880 you know, reporting their test results and that everything is 0:16:09.920 --> 0:16:12.600 sort of going to plan. And then also when you 0:16:12.640 --> 0:16:15.680 have these kind of protest movements, it takes a lot 0:16:15.720 --> 0:16:21.040 of manpower to police and potentially suppress them. So today, 0:16:21.160 --> 0:16:25.240 for instance, I'm seeing images of police officers who are 0:16:25.360 --> 0:16:30.880 you know, taking protesters phones individually and deleting photos off 0:16:30.920 --> 0:16:34.320 of them of the demonstrations, which is similar to what 0:16:34.360 --> 0:16:37.040 we saw in Hong Kong as well. So can that 0:16:37.240 --> 0:16:41.320 kind of I guess, manpower or that kind of like 0:16:42.200 --> 0:16:45.000 you need an army of workers basically doing this. Can 0:16:45.040 --> 0:16:49.160 that be maintained or is there a chance that eventually, 0:16:49.280 --> 0:16:51.440 you know, the people who are enforcing a lot of 0:16:51.480 --> 0:16:53.520 these rules are just going to say, you know what, 0:16:53.680 --> 0:16:58.440 it's not worth it anymore, and I'm out. Yeah, I 0:16:58.480 --> 0:17:02.560 think local fiscal stress can cause some kind of issues 0:17:02.760 --> 0:17:05.359 down the road, and I don't think we're quite there yet. 0:17:05.480 --> 0:17:10.480 But you know, basically grassroots level community workers and police 0:17:10.480 --> 0:17:15.520 forces who are official civil servants actually are very limited 0:17:15.600 --> 0:17:20.240 in numbers and is certainly not sufficient to carry out 0:17:20.400 --> 0:17:23.639 all the tasks that the government asked them to do today, 0:17:23.680 --> 0:17:28.000 you know, which include enforcing quarantine, providing social services, etcetera, etcetera. 0:17:28.480 --> 0:17:31.960 So the Change government has had to rely on these 0:17:32.000 --> 0:17:37.480 informal workers quasi formal workers at the community level for quarantine, 0:17:37.560 --> 0:17:41.280 but also in terms of repression, there is a whole 0:17:42.680 --> 0:17:47.280 entire you know, base of manpower who are quasi formal 0:17:47.680 --> 0:17:51.400 enforcers for the Chinese governments, their contract workers. They get 0:17:51.520 --> 0:17:54.440 hired sometimes even on the spot. So I've seen footages 0:17:54.440 --> 0:17:57.000 where in Juhan to to deal with the protests, the 0:17:57.080 --> 0:17:59.720 Chinese government just gather a bunch of guys off the 0:18:00.320 --> 0:18:02.359 pay them and say okay, you all get three woman 0:18:02.440 --> 0:18:06.240 b a day and they become enforcers for the Chinese government. 0:18:06.760 --> 0:18:10.399 That all works okay, as long as the money is there. 0:18:10.800 --> 0:18:14.240 But at the local level, not every local government can 0:18:14.280 --> 0:18:17.080 come up with the money at the drop of a 0:18:17.160 --> 0:18:22.280 hat anymore, especially in tier three tier four cities in 0:18:22.359 --> 0:18:27.320 China outside of provincial capitals, the fiscal resources are really stretched. 0:18:27.400 --> 0:18:30.639 Land sales have collapsed, as you guys have discussed on 0:18:30.680 --> 0:18:33.919 the show already, that has been a major source of 0:18:34.000 --> 0:18:37.359 discretionary spending at the local level. Now, if there's a 0:18:37.359 --> 0:18:40.640 major protests at a second tier of third tier city, 0:18:40.680 --> 0:18:43.280 they have to write a note to the central government saying, oh, hey, 0:18:43.320 --> 0:18:45.320 you know we have protests, Please give us some money 0:18:45.359 --> 0:18:48.080 so we can pay for people to quell the protests. 0:18:48.160 --> 0:18:51.160 That may not happen fast enough, and we really could 0:18:51.240 --> 0:18:54.560 see some things getting out of control. Fortunately for the 0:18:54.640 --> 0:18:58.520 Chinese government in places like Beijing and Shanghai, there's plenty 0:18:58.560 --> 0:19:01.800 of money. Police forces in these places, as we're seeing, 0:19:01.920 --> 0:19:05.679 are enormous, especially in Beijing. There are just tens and 0:19:05.720 --> 0:19:09.000 tens of thousands of different kinds of police forces in 0:19:09.040 --> 0:19:12.520 the immediate immediate vicinity of the city, and some of 0:19:12.520 --> 0:19:15.480 them are being mobilized right now. You know you sort 0:19:15.480 --> 0:19:18.919 of anticipated my next question, but can you talk more 0:19:19.000 --> 0:19:23.000 about the nexus of local government economic stress and the 0:19:23.080 --> 0:19:25.920 decline in real estate because I think we we've talked 0:19:25.960 --> 0:19:28.200 about it in a few different episodes in the past. 0:19:28.440 --> 0:19:32.800 How important real estate sales or land sales specifically are 0:19:33.359 --> 0:19:36.919 two local finances, But can you explain that mechanism, like 0:19:36.960 --> 0:19:39.679 what is the role that local land sales play? And 0:19:39.720 --> 0:19:42.800 then how much stress have the local governments come under 0:19:42.960 --> 0:19:46.520 thanks to the well known property bus that's going on. Yeah, so, 0:19:46.520 --> 0:19:48.280 so there's an intimate link. I mean, the first thing 0:19:48.320 --> 0:19:51.240 to realize about China is that despite the fact that 0:19:51.280 --> 0:19:54.000 we talk about, you know, Chinese industrial policies and all 0:19:54.000 --> 0:19:58.919 these great tech companies in China, these tech and industrial companies, 0:19:58.920 --> 0:20:02.520 they only benefit a small handful of cities in China. 0:20:02.840 --> 0:20:06.479 So a lot of the industrial activities concentrated in cities 0:20:06.480 --> 0:20:10.679 in Guangdong, in Jorjian Province, in Shanghai obviously, and of 0:20:10.680 --> 0:20:14.919 course you have political financial activities in Beijing. Outside of 0:20:14.960 --> 0:20:18.960 these key cities. You remember, China has like four hundred cities, right, 0:20:19.640 --> 0:20:21.920 so for the vast majority of cities in China, there's 0:20:21.960 --> 0:20:24.359 really not much going on in some of these cities 0:20:24.359 --> 0:20:27.480 in western China and northeastern China and some parts of 0:20:27.520 --> 0:20:31.679 the Southwest. And so for those governments, in order to 0:20:31.760 --> 0:20:34.720 generate GP growth, what they need to do is to 0:20:34.840 --> 0:20:39.000 sell land to property developers. Property developers build the land, 0:20:39.080 --> 0:20:42.400 and then also for the government, they use the current 0:20:42.560 --> 0:20:46.240 revenue stream from selling land as well as the prospect 0:20:46.400 --> 0:20:50.360 of land value in the future as collateral to get 0:20:50.480 --> 0:20:54.200 loans from the banks to build infrastructure. So using current 0:20:54.200 --> 0:20:57.440 and future land sales as a way to finance infrastructure 0:20:57.680 --> 0:21:02.199 building is the main economy model for the majority of 0:21:02.200 --> 0:21:05.000 cities in China. The problem, of course, recently is because 0:21:05.040 --> 0:21:08.720 of the leveraging policies and COVID lockdown, property sales have 0:21:09.520 --> 0:21:12.520 been negative for quite a few months now, and then 0:21:12.560 --> 0:21:15.280 that means land sales have completely dropped off, you know, 0:21:15.320 --> 0:21:20.679 down a year to date, and so then for the 0:21:20.720 --> 0:21:25.520 local government's their ability to build infrastructure also has diminished 0:21:25.560 --> 0:21:30.160 quite substantially, and this has caused economic slowdown across many 0:21:30.200 --> 0:21:34.800 localities in China. One other dynamic I'm curious about, and 0:21:34.840 --> 0:21:37.720 maybe it's totally off the mark here, but I seem 0:21:37.800 --> 0:21:42.040 to recall that at the recent People's Congress, one of 0:21:42.080 --> 0:21:43.679 the and I can't remember his name, but one of 0:21:43.720 --> 0:21:47.560 the Chinese Communist Party officials that was elevated was perceived 0:21:47.560 --> 0:21:51.920 as having been rewarded for successfully implementing a hard lockdown 0:21:52.000 --> 0:21:55.920 in I think it was Shanghai. And I'm curious whether 0:21:56.280 --> 0:22:00.520 regional chiefs others sort of see this dynamic and sort 0:22:00.560 --> 0:22:03.360 of and when you're thinking about the sort of draconian 0:22:03.400 --> 0:22:06.920 approach to containing COVID, whether there's sort of an inter 0:22:07.000 --> 0:22:11.800 regional competition among local officials who perceived this as a 0:22:11.880 --> 0:22:16.640 moment to elevate their standing within the National Communist Party. Yeah, 0:22:16.680 --> 0:22:18.960 so I think you're referring to Yin Lei, who's a 0:22:18.960 --> 0:22:23.520 public health expert, former party chief of Citron, who has 0:22:23.560 --> 0:22:27.040 been made the party sector of Beijing. I believe this, 0:22:27.160 --> 0:22:29.080 by the way, actually will be a big test for him, 0:22:29.200 --> 0:22:32.240 because of course part of a party chief's job is 0:22:32.280 --> 0:22:35.359 to handle instability. Yeah, so, so I think you have 0:22:35.400 --> 0:22:39.199 cases like that, people getting promoted for pursuing very draconian 0:22:39.200 --> 0:22:42.840 lockdown policies. But in general, I think the problem is 0:22:42.880 --> 0:22:45.679 that if if you look at the new regulations issued 0:22:45.720 --> 0:22:49.960 on November eleventh, the twenty measures, even though it's signals 0:22:50.000 --> 0:22:53.480 some kind of relaxation, at the same time, it also 0:22:54.080 --> 0:22:59.359 basically required local officials to still remain very vigilant about 0:22:59.480 --> 0:23:03.040 the spread out of COVID, still holding them responsible for 0:23:03.920 --> 0:23:08.439 very rapid proliferation of COVID cases. Of course, with Amicron 0:23:08.680 --> 0:23:12.359 that is just going to happen. With any degree of relaxation, 0:23:12.560 --> 0:23:16.240 inevitably you will have rapid spread of COVID. So local 0:23:16.280 --> 0:23:19.440 officials are still very afraid that they would be held 0:23:19.520 --> 0:23:23.920 responsible for rapid spread of COVID under their charge in 0:23:23.960 --> 0:23:27.720 the jurisdiction that that they control, and therefore in many 0:23:27.720 --> 0:23:31.080 cases they have still ordered their underlings to be extremely 0:23:31.160 --> 0:23:35.000 vigilant against the spread of COVID, which then, of course 0:23:35.280 --> 0:23:37.520 has led to a lot of these crude measures that 0:23:37.640 --> 0:23:41.000 people are protesting about. So so I think what is 0:23:41.080 --> 0:23:44.760 required is a very clear signal from the central government 0:23:44.760 --> 0:23:47.240 that you know, indeed, we're not going to hold people 0:23:47.280 --> 0:23:50.880 responsible anymore for the rapid spread of COVID. And despite 0:23:50.920 --> 0:23:53.800 you know, various rumors that are swirling around that you know, 0:23:53.960 --> 0:23:56.800 you know, some investment banks are talking about, I just 0:23:56.880 --> 0:24:00.800 don't see that happening in the immediate future, because, uh, 0:24:00.880 --> 0:24:04.560 such a clear signal would really go back against sort 0:24:04.600 --> 0:24:08.720 of three years of very strict COVID policies which the 0:24:08.840 --> 0:24:12.040 Chinese government has told the world but especially the people 0:24:12.040 --> 0:24:16.000 of China, that the stringent policies have been China's model 0:24:16.320 --> 0:24:19.639 has worked against the spread of COVID, and to completely 0:24:19.680 --> 0:24:22.639 go against that, I think would be pretty un usual. 0:24:39.720 --> 0:24:43.120 I want to dig more into what sort of happens 0:24:43.160 --> 0:24:46.000 from here, but before we do, just going back to 0:24:46.800 --> 0:24:49.800 the question of why are these protests being allowed to 0:24:49.840 --> 0:24:53.280 happen now? I mean, one of the theories, and again 0:24:53.280 --> 0:24:56.120 it's something that tends to pop up when there are 0:24:56.560 --> 0:24:59.400 signs of dissent. One of the theories is that, well, 0:24:59.440 --> 0:25:04.440 maybe there are various factions of political elites who are 0:25:04.520 --> 0:25:07.840