China’s perception of Covid remains pretty much the same since the virus first emerged in Wuhan in late 2019: It’s a public health threat that must be eliminated at all costs.
In that line, China stipulates at least two weeks in quarantine for anyone arriving from other countries. Domestically, even the slightest flareup is met with a barrage of targeted testing, contact tracing and quarantines, with citywide lockdowns as a last resort.
The approach, which has become known as “dynamic clearing” with a “Covid Zero” policy, acknowledges that infections occur, but aims to stop the transmission of the virus.
But the highly infectious Delta and Omicron variants have made it more difficult for China, which hasn’t gone a day with zero new local cases reported since October.
In mid-March the daily tally topped 5,000 for the first time since the peak of the initial outbreak in early 2020.
The financial hub of Shanghai – China’s second-richest city that contributes 3.8% to the GDP – launched a two-stage lockdown of its 26mn residents on Monday.
The prevailing gloom has added to weak investment and a broader downturn in the property market.
Goldman Sachs has cut its forecast for China’s growth in 2022 by 0.5 percentage points due to the increased difficulty of containing the Omicron variant. In an extreme case where a national lockdown were imposed, economic growth could plunge to 1.5%, the lowest in more than four decades, the bank said.
China faces several hurdles to getting back to normal.
While nearly 90% of the population has been vaccinated and a growing number received boosters, the rates are lower for the elderly: 82% for those between 70 and 79 and about 51% for those over 80, health officials said in mid-March. Many analysts also point to the lower efficacy of vaccines developed in China.
But in China’s calculus, the benefits outweigh the costs.
The government estimates the strategy has avoided 1mn deaths and 50mn illnesses. Fewer than 5,000 people have died from Covid in the country, mostly during the virus’ initial spread. That compares to more than 900,000 deaths in the US, which has a population less than a quarter the size of China’s.
China’s economy totalled $15.92tn in 2020 and market research firm IHS Markit estimates that it reached $18tn last year on export manufacturing growth and capital for new projects.
By comparison, the US economy reached about $23tn last year.
Covid Zero has also allowed the Chinese economy, the world’s second biggest, to grow while other major economies contracted in 2020.
For sure, Covid Zero has sent ripples through the global supply chain.
The global economy – already struggling with war in Ukraine and the stagflation risks it’s fanning – is bracing for greater disruption as China scrambles to contain its worst outbreak of Covid-19 since the pandemic began.
About 20% of the cargo coming into the busiest container gateways in the US is estimated to be from the Shenzhen region, according to a spokesman for the Port of Los Angeles.
A survey of fund managers released last week by Bank of America Corp showed confidence in global growth was the lowest since July 2008 and expectations for stagflation jumped to 62%.
All said, China has given no sign of backing away from its strategy of reacting forcibly to every flareup in the hope that it is quickly brought under control with few economic and social ramifications.
