China counts the cost of its zero-Covid policy
China counts the cost of its zero-Covid policy

China counts the cost of its zero-Covid policy

Dozens of cities in China have been completely or partially shut down in response to the proliferation of Covid-19 cases, meaning a population of roughly the size of the United States has been stuck at home for several weeksoften with limited access to food and medical care.

Among the cities in lockdown, Shanghai has received the most attention. Deserve it. Although the city eased the quarantine rules somewhat this week, about 4.5 million remain. people trapped in their homes, and about 7.9 million. have permission to leave their homes but must remain in their neighborhoods.

Food distribution has collapsed in some parts of the city, leaving some residents starving as piles of rotting products are left on the streets. That many people’s anguish in their apartments and cope on sparse rations have been caught in videos shared widely on social media.

But the crisis in Shanghai and other cities is not just humanitarian. It’s most sharp an economic problem and to some extent also a political issue. The IMF has lowered its GDP growth forecast from 4.8 percent to 4.4 percent for the full year – a particularly sharp decline from the 8.1 percent announced last year, hurting both China and the global economy.

The crisis appears to be particularly pronounced in April. Ting Lu, China’s chief economist at Nomura, predicts that GDP growth in the second quarter of this year will fall to 1.8 percent, down from the actual 4.8 percent seen in the first quarter.

The causes behind the crisis reveal deeper lines of error. One source of weakness is the severe contraction in the country huge real estate market, which has relinquished a long-standing role as a dynamo for broader prosperity. Enough real estate to house an estimated 90 million people now stands empty.

Nevertheless, the biggest drag on GDP growth is political. Beijing is sticking to its zero-Covid policy. The full and partial shutdowns in cities across the country are destroying the demand for housing, durable consumer goods and capital goods as incomes fall and uncertainty rises. The pure logistical challenge getting items from A to B seems like a big draw.

While China’s population of 1.4 billion people is struggling with their third year with Covid, many have drained their savings to a level where they are committed to reducing spending.

All this sheds a gentle light on Beijing’s Covid strategy. National pride has prevented China from approving foreign mRNA vaccines for use among its people, leaving them to take the less effective vaccines developed by domestic companies.

This has meant that despite an impressive vaccination rate (88 percent of people have had two jabs), the elderly in particular are still thought to be at real risk for coronavirus.

It is true that Beijing has called for the development of home-grown mRNA vaccines – two of which have now gone into clinical trials – but China needs to act now on dispatch. It should swallow its pride and approve mass imports of foreign mRNA vaccines right away, thus enabling it to map a way out of its draconian zero-Covid policy and slacken on lockdowns that impose a huge economic and psychological toll.

The urgency of this task can not be underestimated. China’s zero-Covid policy had largely kept the spread of the virus in check until the highly contagious Omicron variant emerged. Beijing now has a sharp choice: launch a mass vaccination program using foreign mRNA vaccines or sustain the devastating economic and social costs of continued shutdowns.

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