US extends China tariff exclusions for five months. The office of the U.S. Trade Representative, Katherine Tai, announced Tuesday an extension of China 301 tariff exclusions on 352 Chinese imports and 77 Covid-related categories until May 31, 2024. (Sourcing Journal)

Oil prices slide as Red Sea transport disruptions ease. Oil prices fell around 1 percent on Thursday as concerns eased about shipping disruptions along the Red Sea route, even as tensions in the Middle East continue to fester. (Inquirer)

Iran, Russia to trade in local currencies instead of US dollar. Iran and Russia have finalized an agreement to trade in their local currencies instead of the U.S dollar, Iran's state media reported on Wednesday. (Reuters)

The 5 stores most likely to declare bankruptcy in 2024. Unfortunately, just because a new year is beginning, it doesn't mean that companies' financial challenges will immediately end, and because of that, expect more bankruptcies in 2024. (MSN)

Vote for 2024. Record number of countries will go to elections at a time when young populations’ trust on democracy is waning. (Down to Earth)

China sanctions US firm, two researchers over Xinjiang work. China said it was sanctioning a US company and two human rights researchers over work related to Xinjiang, escalating a dispute between the nations over allegations of forced labor. (Bloomberg)

US forces destroy swarm of drones and missiles launched by Houthis. A surge of Houthi attacks in recent weeks has disrupted international shipping, and prompted the U.S. to step up its military presence in the region. (Axios)

Global mergers and acquisitions hit lowest level in a decade. Global merger and acquisition activity in 2023 fell 17% to $2.87 trillion, the lowest level in over a decade, according to London Stock Exchange Group data. (Axios)

The global economy in 2024: Key clues to watch out for. U.S. interest rates, oil prices and the Chinese economy will determine the global economy next year. (Al Jazeera)

The 2024 economy could be shockingly normal. The economy in 2024 is on track to be described with a word that hasn't been applicable yet this decade: Normal. (Axios)

As Gaza war grinds on, tensions soar along Israel’s volatile northern border with Lebanon. Israeli officials are stepping up threats against the Lebanese militant group Hezbollah, warning that Israel is running out of patience as the two sides continue to trade fire along Israel’s volatile northern border. (AP)

China reaffirms its military threats against Taiwan weeks before the island’s presidential election. Weeks before Taiwan holds elections for its president and legislature, China renewed its threat to use military force to annex the self-governing island democracy it claims as its own territory. (AP)

Hapag-Lloyd says Red Sea route still too dangerous. One of the world's biggest shipping firms, Hapag-Lloyd, will not resume its use of the Suez Canal despite an international military operation to keep the area safe. (BBC)

The Long Tail of China’s Zero-COVID Policy

Nancy Qian, Professor of Managerial Economics & Decision Sciences at Kellogg School of Management, Northwestern University

For three years, China’s zero-COVID policy consistently received high-profile media coverage from the Chinese and the international press. During the first phase of the pandemic, China’s mass mobilization of resources and strict region-wide lockdowns were seen as highly effective—a testament to the advantages of autocratic power. But after vaccines arrived and Western countries resumed normal economic activities, China’s ongoing restrictions became a source of growing concern.

Then, when the restrictions were finally lifted in late 2022, the press coverage dissipated, and the official Chinese position was silence. Just as the Chinese people were starting to regain their economic footing and reckon with the emotional fallout of the previous three years, the world stopped paying attention.

Yet the legacy of zero-COVID will not soon be forgotten. For three years, nearly every city was under various forms of lockdown, with as many as 370 million people isolated in their homes at the policy’s peak. Shanghai, China’s economic hub, was among the cities subjected to the most severe lockdowns. When it was shuttered for two months in 2022, economists worried that national GDP would fall by several percentage points.

Today, the pain is felt more broadly, with remuneration and jobs being cut across the urban economy. Salaries in typically high-paying tech and finance jobs have been slashed by 40%, and even civil-service jobs, which pay less but are considered more stable, are experiencing substantial pay cuts. Such reductions are especially painful in a country with an already low baseline income level. In 2022, urban China’s median per capita disposable income (after taxes) was $6,224, compared with $55,832 in the United States. (Of course, prices are higher in the U.S., but not by a factor of 8.97.)

Worse, the mass layoffs that started in the Chinese tech sector in 2021 have increased over time, with more than 200,000 tech jobs eliminated just between July 2021 and March 2022. And that figure does not account for the knock-on effects in closely connected sectors such as finance or law, let alone the broader effect on consumption and wealth accumulation, where these jobs have a disproportionally large impact.

China’s much poorer rural areas have arguably suffered even more. In 2022, rural per capita disposable income was a mere $2,777. Generally, rural households supplement their agricultural income by working as migrant laborers in cities, opening their hometowns to tourists from urban areas or abroad, and selling high-value commodities like tea or flowers in urban markets. But during the zero-COVID period, rural villages were cut off from urban markets and tourists, leaving their inhabitants to eke out a livelihood as subsistence farmers.

Making matters worse, zero-COVID’s demands on public spending deepened local government debt, and now the country’s enormous real-estate sector is in crisis, with overall growth continuing to slow. These economic problems come at a time of acute personal suffering for many Chinese. Millions of migrant workers remain traumatized from living in dormitories or apartments without kitchens, surviving on instant noodles for weeks and months at a time. The full costs of COVID and the lockdowns are still being tallied. While the youth suicide rate ticked up notably in the U.S. during the pandemic, it doubled in China between 2019 and 2021.

When the government did finally finish lifting zero-COVID restrictions, the vaccination rate was still low among the elderly, and there was little time for hospitals and health workers to prepare for the one billion infections that soon followed. Given the sheer size of that figure, China did better than many expected. The virus did not mutate into a more-virulent form, and the relatively less-effective Chinese vaccine still protected the bulk of the population from serious illness or death. An estimated two million people died in the two months after the end of zero-COVID, but that means China (with its 1.4 billion people) still had a much lower mortality rate than the U.S.

China’s bigger problem was that all these deaths came suddenly, thus overwhelming funeral homes and forcing families to conduct expedient cremations and burials without traditional grieving practices. These experiences, combined with the official silence on the subject, have left a mute but palpable sense of collective pain.

Public reactions to these challenges have been mixed. Not surprisingly, young people who only ever knew China’s pre-pandemic “economic miracle” are the most dispirited. Youth unemployment was at a record high of 21.3% this past June, before China stopped releasing such data altogether. Now, many younger Chinese simply want to give up (“tang ping”) or leave the labor force to become “full-time children.”

The older generation is more stoic. Most of those born before the 1990s remember poverty. In the 1970s and 1980s, China was one of the world’s poorest countries, and a single bad harvest could mean starvation in the countryside. In 1978, the average city dweller had a mere 3.6 square meters (39 square feet) of living space. Older Chinese can endure new hardships knowing that their children will still be better off than they were at the same age—no matter what happens.

Some are even cautiously optimistic following the shift in the tone of U.S.-China relations. After years of rising tensions, recent diplomacy—including U.S. Secretary of State Antony Blinken’s visit to China in June, and Chinese President Xi Jinping’s recent visit to the U.S.—signals a return to stability, even if not a fundamental improvement in this most important of international relationships. Stability can restore domestic and international investors’ confidence in the Chinese economy, thereby generating more tourism, trade, jobs, and pay hikes. There is hope yet for more Chinese to escape poverty and resume a normal life.

This article originally appeared on Kellogg Insight.

Week in Review Editorial Team:

Annacaroline Caruso, editor in chief

Jamilex Gotay, editorial associate

Kendall Payton, editorial associate