After a two-month lockdown unseen in a century, Shanghai lifted its lockdown on June 1. However, the lives of its people, the stagnating operation of companies, and the fleeing of foreign capital may mean the city of Shanghai will never be the same again.

The already fragile credit system of Chinese society has further eroded under this lockdown crisis and is beginning to crumble. 

High-level power struggles within the Chinese Communist Party (CCP) are reheating. With the annual Beidaihe Conference approaching, the top leaders within the CCP will likely fight more fiercely around the two lines of epidemic prevention and stabilizing the economic market. As a result, Chinese society is inevitably swinging into an even greater upheaval.

The following analysis is from Chinese language media Xin Tang Ren.

As Shanghai returns to normal, its economy also recovers—at a very slow pace.

According to China’s official economic data, the added value of China’s industrial enterprises above their designated size increased by 0.7% from the previous year, reversing the 2.9% decline in April. However, China’s service industry production index fell by 5.1% in May, and the retail sales of consumer goods fell by 6.7% from the previous year. 

And unemployment is very high. The surveyed unemployment rate in 31 major cities rebounded to 6.9%, the highest on record. 

A recent Reuters report shows that China’s factory operations have improved. Still, consumption and employment data show that the economic recovery is weak. Moreover, the current strict Zero-Covid policy is still dragging the economy down.

Earlier this month, in an article titled “Relief, Reunions and Some Anxiety as Shanghai (Mostly) Reopens,” the New York Times discussed how the 25 million Shanghai residents have figuratively lost their lives after the two-month lockdown ended. In addition, according to the article, the city-wide lockdown has significantly impacted Shanghai businesses. 

For some small and medium-sized garment factories, it may take two months for the factories to resume normal production. Other businesses have mentioned that currently, the logistics are still greatly affected. Even if the lockdown is lifted, the shortages of raw materials will affect the factory’s production. In short, from a macroeconomics standpoint, Shanghai will not return to normal in a short time.

Mr. Song, a Shanghai-based entrepreneur, currently living in the U.S., told Chinese language media Xin Tang Ren that he believes there is a plan behind Beijing’s so-called city-wide lockdown. And its underlying goal is to root out privatization and let these enterprises die naturally. 

Mr. Song said that many of his friends are doing business in China. Now that Shanghai has been closed for two months, many companies may have broken their capital and industrial chains. Now they need to restore these industrial chains. Most private enterprises have reached the brink of collapse. Some have already collapsed.

Mr. Song said that many Chinese companies are moving to Southeast Asia and South America. Before, more than 90% of the products were made in China. But now, the industrial chain has begun to disperse, and we can gradually see more products from South America, Vietnam, India, and other countries.

Mr. Song said that no force could reverse the current collapse trend of China’s economy because the moving out of an enterprise or a headquarter may lead to the break-up of the entire industrial chain. And it will be tough to restore the industrial chain in the future. It could take decades to do so. 

Mr. Song said he had lived in Shanghai for over 50 years. After such a prolonged and torturous city lockdown, he felt that some subversive ideas have flashed through some Shanghainese because they thought that living in China and even in Shanghai would involve the issue of life or death. The people now believe that Beijing’s propaganda may be false. Now many Shanghai people plan to flee, and Shanghai people who have gone abroad do not intend to return to China.

Dr. Yang Jingduan, an American integrative psychiatrist, told Xin Tang Ren that the Shanghai lockdown threatened people’s lives and freedom. Furthermore, it has seriously traumatized the spirit of the Shanghai people, leaving an unerasable stain on people’s minds and bodies. It will have a long-term impact on the future of Shanghai and the future of China as a whole.

Dr. Yang Jingduan also said that the lockdown of Shanghai this time has worsened China’s birth rate decline. Suppose everyone’s basic living conditions are restricted or even in danger because of the extreme lockdown measures. In that case, it is hard to imagine that people are willing to bring a new life into this world or build a family under such uncertain factors.

The declining birth rate in China would partly wipe out a vital component that makes up China’s economic development. In turn, it would ramp up the flight of foreign capital. The consequences are severe. 

Besides, Chinese society is also facing a social distrust within its government.

Mr. Shi Shan, the senior editor and chief editor of the Chinese language media Da Ji Yuan said the Shanghai authorities would blame the city’s lockdown on the neighborhood committee after reopening. He said the trust within the regime has collapsed, and there are also two layers. 

One is the relationship between the local authorities and the central regime, or Beijing. And the other is the relationship between the Shanghai grassroots and municipal authorities. 

People in the neighborhood committee might argue that they were told to put up iron railings and implement all kinds of lockdown measures. Obviously, you asked us to do this, and now you are dumping the blame and putting pressure on our level. Then what should we do in the future? When you give us an order in the future, shall we follow or not? 

And that should be considered in the context of conflict at the top of Beijing’s leadership.

The Beidaihe meeting, or “summer summit” known to China watchers, is held annually in the resort town in Hebei province. It is where China’s leaders and elders from earlier generations meet in an informal setting to discuss policies that will set the tone for major domestic issues. 

In May, the General Office of the Central Committee of the CCP issued the “Opinions on Strengthening the Party Building of Retired Cadres in the New Era.” The statement requires retired cadres and Party members to strictly follow the Party’s discipline and rules, not arbitrarily discuss significant policies of the Party Central Committee or spread negative political remarks. 

Many commentators believed this was a public warning from Xi Jinping to CCP elders who might oppose him at the Beidaihe meeting. Instead, the infighting at the top of the CCP has become public and heated.

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