There’s no question that the way Beijing handles COVID’s spread is deeply destructive to the world’s second-largest economy, writes WeifengZhong. But it’s misguided to think that the end of lockdowns will solve China’s economic problems.
But observers should curb their enthusiasm about China’s economic recovery, and not just because of the lingering pandemic. A cornerstone of China’s state capitalism, local governments’ strong incentives to grease the economic wheel, is broken, which started before the current wave of lockdowns swept the country.
Where you stand sometimes depends on where you sit, and for local governments in China, a large part of their fiscal income sits on land sales. Until recently, local authorities had derived nearly half of their dough for years by auctioning off long-term land-use rights — a way around China’s constitutional requirement that land is publicly owned.
England, after Henry VIII’s break with Rome in 1534, had a similar experience. As he separated the Church of England from papal authority, the king dissolved monasteries, convents, and the like and seized the massive amounts of land they sat on.
In June 2021, China’s central government announced it would take control of the collection of land-sales revenues from local land departments. From then on, property developers would make land-purchase payments to Beijing, which would then let local authorities use the funds attributed to them. While, technically, the funds still belong to local governments, the policy put local authorities under Beijing’s microscope, making them less free to manage their economies.
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