The Daily Telegraph

The dreadful truth for Beijing is that China is losing the Covid Cold War

Its lockdown ‘success’ pushed the West into an existentia­l crisis. Now the capitalist world is winning

- SHERELLE JACOBS FOLLOW Sherelle Jacobs on Twitter @Sherelle_e_j; READ MORE at telegraph.co.uk/ opinion

China won the first half of the Covid Cold War decisively. It executed lockdowns with immaculate precision, cuffing dissenters to balcony railings and sealing citizens in their homes. Having near enough eliminated Covid within its own borders, it fired up its industrial engines to meet roaring demand for Chinese goods. A diplomatic coup over the United States followed, as the World Health Organisati­on ruled out the Wuhan lab leak theory. Most powerful of all was China’s psychologi­cal victory; as Beijing exulted in the liberating discipline of the Chinese Way, the locked down West brooded over the selfish inadequaci­es of freedom.

Now, though, a lousy vaccine strategy and a counterfei­t economic recovery are coming back to haunt the Chinese Communist Party. A Western world that has spent a year luxuriatin­g in existentia­l crisis might dare to wonder: is the brute force of the authoritar­ian, centralise­d state no match after all for the innovative agility of a free capitalist society?

In an astonishin­g admission of weakness, China’s top disease control official has confirmed that the efficacy of the country’s Covid vaccines is low. With trials abroad suggesting that protection rates could be as poor as 50 per cent, the country’s regulator is now considerin­g whether to mix jabs to boost their effectiven­ess.

This is a catastroph­e for China. The country is stuck in an unsustaina­ble zero Covid trap, only able to maintain an upper hand over the virus by closing its borders to almost all foreigners and limiting domestic travel. Beijing could be left behind within months, as rival countries reach herd immunity and reopen for global business. On this point, even the Chinese commentari­at has been remarkably candid. State epidemiolo­gists have taken to the airwaves, warning that China’s vaccine rates are insufficie­nt to reach herd immunity by the end of year, let alone the end of the summer. Newspaper column inches that usually foam against the “putrid ambitions” of anti-chinese forces are instead analysing the progress of Britain, Israel and the United States with sober dread.

Nor are China’s vaccine woes the only threat to the country’s apparent Covid advantage. Doubts are starting to grow about Beijing’s miraculous economic recovery. A recent IMF forecast stirred controvers­y, projecting that while Western economies would almost completely avoid permanent scarring – and US GDP in 2024 would be even higher than it was anticipate­d to be before Covid – China’s economy will end up 1.59 per cent smaller than pre-pandemic expectatio­ns.

This exposes the drawbacks of a Chinese model that prioritise­s ambition over invention, saving face over doing the groundwork, and scale over quality. The pioneering civilisati­on that gave us the wheel and the compass has “renewed” itself by becoming a piracy powerhouse that cannot innovate. This, it turns out, is a handicap in a pandemic.

China’s biopharma industry has remained small and low-grade because it is not possible to thrive in cuttingedg­e science by copying rivals (unlike with smartphone­s and solar panels). Beijing has had to rely on outdated technology to churn out vaccines that are not only less effective than their Western equivalent­s but more expensive (the cost price for the Sinovac jab is $30 per dose, compared with Astrazenec­a’s $3). The state subsidises such mediocrity through an overly centralise­d procuremen­t process that promotes a race to the bottom. The modest global growth of the Chinese pharma industry in recent years has been mired by corruption scandals and the recall of hundreds of thousands of vaccines.

It is in this troubled context that Chinese firms rushed out Covid jabs for the CCP. Having given the coronaviru­s to the world, Beijing had hoped to rehabilita­te its image through vaccine diplomacy. It is a strategy that may be about to backfire calamitous­ly.

Not that the West is perfect. Astrazenec­a’s woes show that developing and rolling out a highly effective and cheap vaccine is a challenge. As the Anglo-swedish firm’s recent run-in with US regulators also demonstrat­es, Western Big Pharma is not immune from legitimate criticism over data transparen­cy. Still, there is something in the fact that profit-driven Western companies have used Covid-19 as a selfish PR opportunit­y for themselves, rather than for the selfless greater good of their nations. With their reputation­s on the line, they have aimed to develop vaccines that work as quickly as possible – rather than as quickly as necessary.

The Chinese economy’s post-covid path invites similar scrutiny. The country’s crushing debt levels – worsened by uncontroll­ed public sector “recovery” spending – may not be as sustainabl­e as mainstream economists claim. Its “mass entreprene­urship and innovation drive” has stifled competitio­n with garbage subsidies.

The CCP’S “new developmen­t model” to unleash domestic consumptio­n seems predestine­d for failure, given that it depends on the distributi­on of real financial power to ordinary citizens. After slinging hundreds of millions of peasants from the fields into factories, meanwhile, China has run out of low-cost labour just as its population has begun to age rapidly.

To solve these massive long-term problems, the CCP needs to liberalise and open up. Instead, Xi Jinping has doubled down on building an isolationi­st totalitari­an superstate. By contrast, European and American firms are set to power unexpected­ly buoyant recoveries because a more dynamic capitalist environmen­t has forced them to adapt to the new post-covid world, shedding costs and changing their business models as required. Centre-left leaders who have convinced themselves that recovery can only be engineered by generous handouts and aggressive state projects should take note.

There is much we can learn from China’s values – its hunger and energy and innate investment in the future, rather than just the present (which share the same tense in Mandarin).

But if it fails to learn in turn from the West that freedom is crucial to progress, the resurgent Middle Kingdom may yet turn out to be a stillborn superpower.

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