China risks plunging into recession next year as the world’s second-largest economy struggles to contain a surge in Covid-19 cases.
Last week’s decision to scrap President Xi Jinping’s zero-contagion curbs after nationwide protests in November has seen major cities left trapped with soaring infection rates.
Chinese health officials have warned that the country now faces three waves of the highly-contagious Omicron strain this winter. The aftershocks will strangle business activity and push the health service to breaking point.
“[Our] survey suggests strongly that the growth rate of the Chinese economy has slowed quite dramatically, and may be heading for [a] recession in 2023,” World Economics, a London-based research and data group, stated.
“The percentage of companies that claim to be negatively impacted by Covid has risen to a survey high, with more than half of all respondents now suggesting their operations are being harmed in one way or another,” it said.
Sick, not slick:
- Business confidence has fallen to a record low, World Economics pointed out.
- It comes after a frightening picture started to emerge in China’s leading cities.
- Deserted streets and closed schools are becoming the norm.
- In Beijing, businesses are struggling as Covid-19 infections among staff soar.
- The city’s funeral parlors are also struggling to cope with the dead.
Between the lines: “Disturbing signs of a surge in Covid deaths in China’s capital,” Dexter Tiff Roberts, the author of The Myth of Chinese Capitalism, said in his Trade War newsletter at the weekend.
Fudged numbers: “Low official count of mortalities necessary to satisfy state narrative of superior governance. And PCR testing booths abandoned in cities across the country,” Roberts added.
Delve deeper: China’s vaccines have proved inferior to the mRNA shots used in the rest of the world. Also, vast swathes of the elderly population have not been fully vaccinated. They are the most vulnerable in Chinese society.
Big picture: The Institute of Health Metrics and Evaluation in Seattle has projected that more than one million people could die from this hidden enemy next year.
Economic costs: “There is a problem with people thinking the pullback of Covid-zero measures is equivalent to the economy reopening, which it is not,” Leland Miller, the chief executive of research group China Beige Book, told the ZeroHedge website.
China Factor comment: Government officials are facing a winter wave of tsunami proportions as they battle against the SARS-CoV-2 virus. What is at stake is the Communist Party’s right to rule.