China’s zero-COVID policy is ‘so closely identified’ with President Xi’s leadership: Expert

Neil Thomas, Eurasia Group Senior Analyst for China & Northeast Asia, joins Yahoo Finance Live to discuss the economic impacts of China's COVID lockdowns, recent protests over heightened zero-COVID policy measures, and how it reflects in President Xi Jinping's leadership.

Video Transcript

DAVE BRIGGS: Now to our other top story, headwinds for the markets here and rare protests erupting in several cities across China over the weekend and continuing today, pushing back against the government's zero-COVID policy. Protesters also angry over the handling of a deadly fire that killed 10 people last week. There is speculation some may have been trapped in their apartments as a result of these COVID lockdowns.

Joining us now is Neil Thomas, Eurasia Group's senior analyst for China and Northeast Asia. Good to see you, sir. So just your reaction, broadly speaking, to these protests and how they compare to, say, 2019 with Hong Kong and Tiananmen Square.

NEIL THOMAS: These protests are the most significant we've seen during Xi Jinping's time as China's leader, going back to late 2012. But at the same time, that's coming from a very low base. The hallmark of Xi's reign has been a crackdown on political opposition and a focusing of the party's ability to ideologically control.

And I think we need to kind of resist the urge to kind of hope that this is a Hong Kong 2019 protest situation or a Tiananmen Square 1989 situation, and not underestimate the ability of the Chinese Communist Party to repress and control and to use the propaganda and censorship tools that it has been honing for decades now to bring these outbreaks under control.

JARED BLIKRE: And Neil, given what you just said, that they've been honing these tools for decades, how much room do they have to crack down even further before there is an even bigger protest and pushback from the existing status quo?

NEIL THOMAS: It's a great question. We're already seeing a lot of the protest sites over the weekend be filled with police people, plainclothes policemen, be filled with barricades. People walking around those areas are having their mobile phones checked. And Twitter and other foreign apps are being deleted if they're found. People's information is being taken if they've got photos from the protests.

So we're already seeing that repressive response kick in. And I think the protests on Monday were much, much smaller than on the weekend. And we'll see what happens in the next week. I think the protests, the most likely situation is that the beginning of state controls will see them fizzle out. But if there is a moment of repression, if someone gets injured or even badly hurt, then we could see a revival of the momentum, and especially if we don't see any changes in the zero-COVID policy.

We think there will be some continued gradual loosening, perhaps slightly accelerated because of the protests over the weekend. But if there's a snapback to even harsher controls, that may also bring people back out onto the street again. But then, again, we're going to-- that will likely be met with more repression from the government.

DAVE BRIGGS: Yeah, again, these mainly focused on the zero-COVID policy, but we've certainly seen some reporting where there were demands for Xi to step down. How do you expect him to handle or crack down on these protests, should they continue throughout the week?

NEIL THOMAS: That's a key watch point. I think if the protests do become more focused on Xi's leadership or on the party's role in China's governance, then that's going to trigger an even quicker and even harsher crackdown. If they remain just about zero-COVID, which the vast majority have been so far, there's a bit more leeway, and there is a lot more shared frustration at that.

But we've even seen in some of the reports about the protests that some protesters are urging their fellow protesters not to make these demonstrations political and not to criticize the central government. So they can keep the focus on trying to change the zero-COVID policy. So it's a key watch point. At the moment, it looks like it's not turning into a bigger national political movement. But if it does, I think we'll see a much kind of stronger showdown between protesters and the security forces.

JARED BLIKRE: And Neil, we've seen the People's Bank of China, the PBOC, introduce some relative easing measures over the last few weeks. So we know they're listening. But at the end of the day, where does President Xi fall in the scales of keeping the economy afloat and also reining in these protests?

NEIL THOMAS: For Xi, political stability is really the bottom line. So he will do whatever it takes to ensure that the protests don't get out of control. A few scattered vigils of a few dozen people, maybe even hundreds in a couple of cities, that's a manageable problem. But if we do see any momentum to take these protests, that continue these protests and they keep growing, then we will see, I think, a stronger response, no matter what the economic consequences.

But at the same time, they're trying to loosen some of the COVID restrictions and trying to reduce its economic impact. But it is so closely identified, this policy, with Xi's leadership, that it's really hard politically for him to try and back out of it all of a sudden. So I still think it's going to be many months before we get to a stage where there isn't really a zero-COVID policy. And that would be at the earliest reckoning.

DAVE BRIGGS: And Neil, whether or not the data that China provides actually reflects the damage truly done to their economy, how much has COVID actually facilitated or accelerated the surveillance state by the Communist Party prior to COVID?

NEIL THOMAS: Well, everyone now has an app on their phone that shows their status, whether they were allowed into public settings or not, depending on their COVID diagnosis. So I mean, it has certainly increased the surveillance of the Chinese population. But I think it's important to also see the context before COVID. And I think that baseline of censorship, of monitoring, of control, that's the more significant thing than the change that's happened over COVID.

We've even seen some pushback against efforts by a few local governments to try and use the COVID apps to stop dissidents from moving around and to crack down on social protests. And those local governments actually backed down and stopped using that data because the national pushback was so high.

There is quite a concern about digital privacy in China. On the books, at least, China has some of the best digital privacy laws in the world. But when it comes to the overall kind of equation, we have seen an increase in surveillance over COVID, but perhaps not to the level of the panopticon that perhaps some have feared.

JARED BLIKRE: Yeah, on the books-- a key line there. Thank you for those insights.

NEIL THOMAS: Yes, no, that's important to remember.

JARED BLIKRE: You bet. Eurasia Group senior analyst Neil Thomas, thank you again.