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06-2022

China’s COVID-19 lockdown dragged down economy and created ripple effects around the world

China's COVID-19 lockdown dragged down economy and created ripple effects around the world

A woman looks at a barrier in an area under lockdown in Shanghai, China, on April 13.Ellie Song/Reuters

Strict COVID-19 lockdowns in Shanghai and other cities in China are dragging down the world’s second-largest economy, threatening key growth targets and creating an international knock-on effect at a time of worldwide instability.

Parts of Shanghai have now been closed for more than two weeks, with residents unable to leave their homes for any reason. Many have reported running out of food and other goods for life-threatening conditions, along with supply chain constraints as they struggle to access non-COVID medical care.

A handful of neighborhoods began easing restrictions this week, but most of the city’s 26 million people remain closed. On Wednesday, Shanghai reported 26,330 new cases, a daily record, as officials warned community spread was still not in place despite strict controls.

“There is a strong sense of uncertainty throughout the city, and this has been fueled by a lack of supplies, endless lockdowns and an enormous fear of being sent to one of the central quarantine camps,” said Betina Shoen-Behanzin, Shanghai President of European Said the Union Chamber of Commerce in China.

Other cities are also facing tighter restrictions. A recent analysis by financial research firm GaveCal found that, of the top 100 Chinese cities by GDP, all except 13 had implemented new quarantine rules – and “the intensity is increasing.”

Most cargo in China is transported overhead, and new controls are creating chaos, with truck drivers facing the current threat of frequent checks, unpredictable testing requirements and quarantines.

“Prolonged lockdowns in Shanghai and local authority-ordered highway controls in many provinces are severely disrupting logistics in China,” Tommy Wu, a Hong Kong-based analyst at Oxford Economists, wrote in a note on Wednesday.

“We believe that even if highway controls are lifted in the coming weeks, the disruption will take some time to go away and will affect industrial production and exports in April and May – if not longer.”

On Monday, China’s State Council issued a directive to restrict barriers and “more efficient COVID-19 screening along transportation routes.” But despite claims in government-run media that it had helped ease supply chain shortfalls, there were still widespread reports of long delays and drivers unwilling to travel in some areas, fearing being quarantined. Was.

Over the past two years, several provincial and local officials have been unfairly blamed for the outbreak, have lost their jobs, and Beijing is still advocating a strict “dynamic zero-COVID” approach across the country , there are strong incentives to err on the side of additional controls, regardless of recent guidance.

Nick Marrow, principal analyst for global trade at the Economist Intelligence Unit, said Beijing “has insisted this whole time that at the end of the day what wins is health care policy, more than economic policy or anything else.”

Last month, China set a modest annual growth target of “about 5.5 percent”, but most analysts expect it will struggle to achieve it. On Wednesday, China reported a 10.7 percent year-on-year increase in foreign trade in the first quarter, but that probably doesn’t reflect recent disruptions, which began in late March.

Top Chinese officials seem increasingly concerned. Premier Li Keqiang warned this week that “the economic pressure on the downside has increased.” He urged officials to ensure Beijing’s preferred tool for driving economic growth when it comes to ensuring economic stability, accelerating the reduction of taxes and fees, and pumping government money into infrastructure, especially for construction projects. To “reinforce the sense of urgency”.

Mr. Marrow said, “We are going to see continued expansion of the territory in a way that will result in increased productivity, debt repayment, market-based allocation of resources – all of which China is trying to tackle. decades but continues to deviate from other policy priorities.”

The current measures, especially the lockdown in Shanghai – home to the world’s busiest container port – are also straining an already weak global economy. Authorities have attempted to keep port operations running as usual, and some factories have laid off workers on-site, but it is unclear how long these measures could last, with some businesses such as Apple and Tesla is already halting operations in Shanghai.

“We hear more and more that some workers are not volunteering, because there is no clear end to the lockdown and they do not want to be on site for weeks and sleep in the factory or office,” said Ms Schon- President of the European Chamber Behnazin told a media roundtable this week.

Beyond supply chain issues and economic uncertainty, any slowdown in the domestic Chinese economy “has consequences for a lot of markets in Asia” further further, Mr Marrow said, given the size of China’s consumer base.

For the most part, despite the rising economic costs, Beijing has shown no inclination to move away from its strict containment approach to COVID-19, which has left the country increasingly internationally isolated and a population that Anger is also erupting among those who earlier widely supported such measures. ,

In Shanghai, several videos of people arguing with authorities have gone viral, while some residents trapped in their apartments have started screaming from their windows and balconies in despair. One neighborhood even deployed a drone in an apparent attempt to quell such protests. It carried a recorded message instructing residents to “control their soul’s desire for freedom” and go back inside.

The Chinese commercial capital of Shanghai warned on Wednesday that anyone who violates COVID-19 lockdown rules will be dealt with strictly, with citizens rallying to protect their city as its new cases number 25,000. has exceeded. Olivia Chan has more.

Reuters

But “the vast majority of people in China support zero COVID,” said Frank Tsai, the Shanghai-based founder of consulting firm China Crossroads.

He pointed out that Beijing’s approach has been extremely successful in controlling the virus and keeping deaths to a minimum, while enabling much of the country to operate normally from mid-2020 – with restrictions on travel, particularly at international level.

“Most of China has never been locked down, and so for them the drawbacks of this policy are still only theoretical,” Mr. Tsai said.

Reporting on lockdown and supply chain issues in China is also limited by strict media controls. State-run outlets often equate such approaches to “lying” against adopting measures in line with the rest of the world, and allowing the virus to run rampant.

Nor is the apprehension of the government relaxing. About 90 percent of China’s people have been vaccinated, but this is heavily skewed toward younger people, especially when it comes to getting the booster shot, which is important to protect against the Omicron variant.

Only about half of people age 60 or older have had three jobs, leaving them vulnerable. Hong Kong recently showed what happens when Omicron rages in an area with poor vaccination rates; A similar situation in China could kill thousands and put severe strain on the country’s health care system, potentially to the point of collapse.

The risk of such an incident in a country where the government places an absolute premium on stability – and has made COVID-19 containment a major point of pride – is likely to be considered very costly, no matter the economic damage caused by the current approach.

With a report by Alexandra Lee.

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