China’s Covid policy has ravaged its economy

Analysis

08:00

The country is no longer projected to overtake America this decade

town Austin Williams

A Covid-prevention worker guards the entrance of a residential compound placed under lockdown in Beijing in November 2022. Credit: Getty.

Extended lockdowns in Shanghai, Beijing, Guangzhou and other major Chinese cities have caused the Center for Economics and Business Research two revise the predicted date that China will overtake the US economy from 2028 to 2036. Just a generation ago China was a peasant economy, so the real story remains that it has managed to rival the American economy at all, not that it is delayed by eight years .

In order to progress China is going to have to get back to work and hence to a semblance of normality. In doing so China is fast becoming a global pariah, not for its authoritarianism and strict restrictions on personal mobility but now for opening up and allowing people to travel freely.


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The pressure is mounting on world governments to demand pre-flight testing and quarantine for travelers leaving China. After the US, France and India imposed testing mandates, the UK fell into line. Whether Western nations are doing this as a precautionary response to a serious outbreak or just kicking China when it is down is hard to say, but the consequences could be significant for both sides.

As many people predicted, China’s zero-Covid lockdown strategy merely delayed the inevitable spread of the virus once it allowed itself to open up. The fact that there was no natural immunity — exacerbated by severe isolation and brutal quarantine incarceration together with an inadequate roll-out of an ineffective vaccine — has meant that the impact on health and the economy today is all the more brutal.

In the last year alone, China’s industrial profits fell 3.6%; house sales (a major proportion of GDP) have slumped by as much as 30–35%. Retail sales fell by nearly 6% and nationally unemployment stop that 6.7% in the county’s 31 largest cities, while youth unemployment overall was around 18% at the end of 2022.

The implications of this for China — if the evidence from the Western experience can be generalized — will be greater than the sum of its parts and will certainly be more profound than economic data alone can capture.

Many Chinese people have retreated from society. The streets of major cities have been eerily empty, and fear is returning. As we have witnessed in the West, the end of lockdowns does not put an end to the more insidious social malaise.

At the moment, China’s economic recovery is being holed below the waterline by the toll on working lives and pressure on the hospital sector. People are ill and dying and unable to work in many situations. Factory workers have been customs duty to return to work even if they have the virus, but such a stark reversal of the zero-Covid strategy simply exacerbates cynicism.

Indeed, fewer people now blindly accept the word of established Communist Party apparatchiks, and after the heroic battles in November against citywide lockdowns there might emerge a demand for greater transparency and public engagement. For instance, who believes President Xi Jinping’s New Year messages that “we have put the people first and put life first all along” or that “today’s China is a country brimming with vigor and vitality”?

Global events have prompted Western leaders to rethink their supply networks and trade partners. But supporting the nascent liberal ethos of urban protesters ought to be given a higher priority, rather than betraying them by effectively locking them down in their own country.

The knee-jerk reaction of Western states to medically isolate Chinese travelers before viable alternatives are in place seems to be the mirror image of Beijing’s ending of lockdown without any ameliorative measures being introduced. Rather than celebrate China opening up, testing and quarantining its people will surely only exacerbate tensions. The impact that Covid has had on the Chinese domestic economy is obvious, but marginalizing Chinese society while pretending that political relations and economic supply chains will be unaffected is a naïve belief whose implications will be felt far and wide.

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