Inflexible Policies Ruining China's Economy

Over the past 20 years, China has been the biggest and most reliable source of growth in the world economy. It contributed a quarter of the rise in global GDP over that period and expanded in 79 of 80 quarters.

Photo Insert: Retail sales in April were 11% lower than a year earlier and purchases of KFC, cars, and Cartier are weak.

For most of the period since China opened up after Mao’s death, the Communist Party has taken a practical approach to making the country richer, mixing market reforms with state control, The Economist reported.

Now, however, China’s economy is in danger. The immediate issue is its zero-covid campaign, which has caused a slump and may condemn the economy to a stop-start pattern.

That is compounding a bigger problem: President Xi Jinping’s ideological struggle to remake state capitalism. If it stays on this path China will grow more slowly and be less predictable, with big consequences for it and the world.

After nearly two months the lockdown of Shanghai is easing, but China is far from being COVID-free, with fresh outbreaks in Beijing and Tianjin. More than 200 million people have been living under restrictions and the economy is reeling.

Retail sales in April were 11% lower than a year earlier and purchases of KFC, cars and Cartier are weak. Although some workers are living on factory floors, industrial output and export volumes have dipped.

For the full year, China may struggle to grow much faster than America for the first time since 1990, in the aftermath of the massacre near Tiananmen Square.

For Mr. Xi the timing is awful: after the 20th party congress later this year, he intends to be confirmed for a third term as president, breaking the recent norm that leaders bow out after two.

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