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As tensions with the U.S. rise, China signals disappointing economic growth

AYESHA RASCOE, HOST:

China's leaders this week signaled that the world's second-biggest economy is not in great shape. But they're also standing by their dynamic zero-COVID policy, which continues to be a drag on that economy. And all this comes at a time of heightened tensions between China and the U.S. NPR's John Ruwitch joins us now from Beijing. Welcome.

JOHN RUWITCH, BYLINE: Hi, there.

RASCOE: Let's start with that tension between the two countries. President Xi Jinping had a call with President Biden the other day. And I know that one thing that they talked about extensively was Taiwan. You know, tell us about that discussion.

RUWITCH: Sure. I mean, as you know, Taiwan always comes up in these kinds of talks. This time it did have some more urgency because of reports that House Speaker Nancy Pelosi might be making a visit to Taiwan soon. She actually departed on an Asia trip overnight and, in a statement, said she's headed to Singapore, Malaysia, South Korea and Japan, with no mention of Taiwan as a destination. That doesn't mean she won't go there, though. I mean, Beijing considers the island a part of China. It opposes all official contact like this. And Pelosi would be the most senior elected official to go there in a quarter century.

So in the talks on Thursday, Xi Jinping reportedly told President Biden those who play with fire get burned. And on Saturday, the Chinese military conducted exercises near Taiwan, just across the Taiwan Strait from the island. Xi Jinping wants to project strength in the coming months - right? - and he's also aiming for stability. There's a key Communist Party Congress coming up. He's hoping to secure a third term, which would be rare as party boss. So he doesn't want things to go off the rails. He's under pressure at home over COVID and the economy, and now he's got this pressure.

RASCOE: You know, mentioning the economy, like, what exactly is Beijing saying about what's going on economically?

RUWITCH: Yeah, this week there was a meeting of the ruling Communist Party's Politburo. That's the top 25 officials in the country. And the meeting was focused on the economy. In the official readout, the big takeaway was that there was no mention of an official target for GDP growth. They set one earlier in the year. They didn't mention it. Instead, the key phrase the Politburo used was that China should aim for, quote, "the best outcome."

RASCOE: So, I mean, but this is unusual, right? They've always had a target, and they've always met that target. You know, how significant is it that they have gotten rid of the target?

RUWITCH: You know, the target was modest to begin with. The way they worded it was about 5 1/2 percent, and it was the lowest target in three decades. But the first quarter, you know, growth came in under that target. Second quarter was even worse because of Shanghai's two-month lockdown. And it really gets at the crux of the matter. There's this overriding political priority and focus now in China, and that is COVID-19.

China has a policy called dynamic zero-COVID, as you mentioned. They're not living with COVID. They don't want to do what everybody else is doing. So there are these periodic lockdowns that happen. There are smaller-scale ones that pop up from time to time. They have strict border crossing, and they're sticking with it. The Politburo, by the way, signaled there would not be big stimulus to the economy. You know, China has been wary of accumulating debt. The economists that I've talked to also say it really wouldn't work well with zero-COVID in place.

RASCOE: Economic growth has been a pillar of the Communist Party's legitimacy. How long can they keep sacrificing economic growth like this?

RUWITCH: Yeah. Look, zero-COVID appears to be helping keep caseloads down, but there's a price. I spent several weeks in Shanghai. People there are unhappy about having been locked down for two months and are extra skeptical of the government these days. Travel around the country is tough. I came up to Beijing about a week ago. And up until that point, I was blocked from traveling because I lived in an area where there had been a few cases, so tens of thousands of people couldn't travel up here. Also, it's still hard to get in and out of China. I chatted with Kellee Tsai about this. She's dean of humanities and social science at Hong Kong University of Science and Technology.

KELLEE TSAI: The portions of Chinese society that have been more internationalized - business community, intellectuals, students, you know, with traveling back and forth, certainly multinationals - they're really frustrated that China's closed itself off.

RUWITCH: Yeah, at the end of the day, China, though, has, you know, four decades of really strong economic growth behind it. It's got a lot of momentum. The party still enjoys a lot of support. It has the state capacity to keep this up. So for now, Xi Jinping isn't blinking. The thing is that when the world's No. 2 economy shudders, it sends ripples around the world, affecting global growth and things like supply chains and even the inflation outlook.

RASCOE: That's NPR's John Ruwitch in Beijing. Thank you so much for joining us.

RUWITCH: Thanks, Ayesha. Transcript provided by NPR, Copyright NPR.

John Ruwitch is a correspondent with NPR's international desk. He covers Chinese affairs.