China’s choice: Covid-zero or Xi’s Three Red Lines

YOU can’t have your cake and eat it too. It’s an expression that warns people not to want things that are inherently incompatible. China would do well to heed this wisdom.

In recent years, the government launched quite a few ambitious top policies that would fundamentally alter its economy. At the top of mind was its response to the Covid-19 pandemic. While the world is living with the virus, China still has no tolerance for outbreaks.

Another seismic change was Beijing’s approach to real estate, where investment in the sector alone accounted for more than 10 per cent of China’s gross domestic product (GDP). To realize President Xi Jinping’s mantra that “housing is to be lived in, not speculated on”, officials in August 2020 drew the so-called “three red lines”, or accounting measures meant to rein in developers’ debt. It followed with another regulation a few months later capping bank lending to the industry.