China’s Covid crackdown sparks economic shockwaves

Major cities are struggling to contain outbreaks after more than 250,000 cases were reported in the past three weeks

China is grappling with a new wave of Covid-19 infections, forcing lockdowns across the country and wreaking havoc on the world’s second-largest economy. More than 250,000 cases have been reported in the past three weeks and nearly 30,000 on Tuesday.

In Beijing, authorities have closed parks and museums while Shanghai has tightened rules for people entering the city. Mass testing and flash lockdowns have also been rolled out across major cities.

“Some provinces are facing the most severe and complex situation in the past three years,” Hu Xiang, a spokesman for the National Bureau of Disease Prevention and Control, said at a news briefing as reported by the China News Service.

“Densely populated cities like Guangzhou [in South China’s Guangdong province] and [Southwest China’s] Chongqing municipality have become epicenters of the ongoing outbreaks,” Hu stressed.

Microscopic enemy:

  • On Tuesday, the Sichuan provincial capital of Chengdu started mass testing among the 16 million population.
  • Evolving strains of the Omicron variant have been blamed for what is becoming a nationwide crisis at the heart of the economy.
  • Factories, offices, schools, malls, and hospitals have been deemed “high-risk” as “the epidemic” intensifies, state-run Global Times reported.  

Covid restrictions now weigh on 1/5 [one-fifth] of China’s economy.

China Beige Book

Between the lines: “China is the only major country still attempting to eradicate Covid infections. Its population has scant immunity; most have never been exposed to the virus; and vaccination efforts dropped off over the summer and autumn,” The New York Times pointed out in its morning briefing.

Delve deeper: The economy has taken a huge hit. Market euphoria over Beijing’s decision to “relax the “zero-Covid” policy has given way to the harsh realities of life in a bubble.     

Big picture: “Covid restrictions now weigh on 1/5 [one-fifth] of China’s economy, defying central [government’s] call for a more targeted CovidZero [strategy],” China Beige Book, the research group, said on a Twitter thread.

Economic cost: The impact could run into billions of dollars in GDP terms and a winter of misery for the Chinese people.

China Factor comment: In August, we said “the red tide” was “turning, heralding a new wave of economic uncertainty.” Since then, the situation has deteriorated amid Beijing’s bungling attempts to contain the Covid-19 virus.  

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