Fears mount for China’s economy as leaders dig into zero-Covid
Mass testing of China’s vast population could bring further misery to the economy, experts warned on Friday, after Beijing pledged to regain control of the narrative around a zero-Covid policy that has strangled the economy. growth and stoking anger across the country.
Leaders have taken a hardline approach to stamping out virus outbreaks, locking down Shanghai — the country’s economic powerhouse and biggest city — and slowly restricting travel in Beijing on dozens of new cases.
Authorities have refused to bow to growing public outcry over food shortages and spartan quarantine conditions in Shanghai, with top officials pledging on Thursday to “unwaveringly adhere” to zero-Covid and “fight against” criticism of politics.
The Chinese government has held up the strategy as proof that it values human life above material concerns and can avert the public health crises seen in other countries.
But this approach hammers the economy and poses a sharp political challenge to President Xi Jinping.
He must now convince an increasingly volatile public, which has echoed its anger over social media lockdowns, that the trade-off between economy and life is sustainable.
At Thursday’s meeting attended by Xi Jinping, the country’s top brass pledged to “resolutely fight against all words and deeds that distort, question or reject our country’s disease control policies.”
Experts fear that Beijing’s game plan will weigh heavily on the world’s second-largest economy.
Nomura analysts predicted on Friday that mass testing mandates alone could cost up to 2.3% of annual gross domestic product.
Shanghai’s 25 million residents have been repeatedly tested, while some of Beijing’s 21 million people have also undergone repeated rounds of checks – a policy the government says could be rolled out nationwide. to combat the highly transmissible variant of Omicron.
Nomura said that requiring half of the world’s most populous nation to take a test every three days would cost around 0.9% of GDP, while any request that 90% of the population take a test every two days would cost 2.3%.
The restrictions could lead to “pretty high” costs if rolled out nationwide, while offering only “limited” benefits as the hard-to-contain Omicron strain could trigger shutdowns in more cities, Ting said. Lu, Nomura’s chief China economist.
The grim prediction follows Fitch Ratings’ drop in its forecast for China’s economic growth for the year as a whole to 4.3% from 4.8%.
This is a far cry from the official government target of 5.5%.
A key index of service sector activity fell to 36.2 in April, the second lowest on record, in what some experts have called a stark indicator of a country in recession.