China losing $61 billion a month as authorities battle worst Covid outbreak in two years
China is in the midst of a horror new outbreak – and it’s causing the economy to haemorrhage cash as authorities cling to a “zero Covid” policy.
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China has been aggressively pursuing a zero-tolerance approach to Covid – but now, that strategy could be about to seriously backfire.
For most of the pandemic, Beijing’s strict policy was in line with most of the world’s, but it is now in a small minority still clinging to Covid zero while most other nations have reopened to visitors and are finally learning to live with the virus.
But in recent weeks, a new Covid outbreak – said to be the worst in two years – has ripped through the country, plunging a string of regions into tough lockdowns.
This week, it was revealed that Shanghai’s 26 million residents were being locked down over two four-day stages as authorities carried out a testing blitz in a desperate bid to slow the spread.
It ground the city – one of the most economically important for the nation – to a halt, and is just the latest in a string of recent lockdowns, with technological powerhouse Shenzhen, the entire province of Jilin and the leading steel-making city of Tangshan also being shut down as cases skyrocket.
But according to Chinese University of Hong Kong professor Zheng Michael Song, Beijing is paying dearly for these drastic measures, telling Bloomberg China’s Covid lockdowns were costing at least $A61 billion a month, or 3.1 per cent of GDP – and that’s a conservative estimate.
And that already staggering figure could double if other cities join the lockdown party, with Prof Song claiming “the economic cost of lockdown is clearly bigger [in China] than we see in other countries”.
He added that the prediction was a “conservative” one given it did not factor in the impact on wages via inflation.
Prof Song, whose research team has studied live trucking data to calculate the impact of China’s lockdowns, wrote in a recent paper, The Economic Cost of Lockdown in China, that a “full-scale lockdown on a major city such as Beijing or Shanghai would reduce the national real GDP by 4 per cent, of which 7 per cent is contributed by the spillover effects”.
“While locking down one city has a small effect on the national real income in a large economy like China, implementing lockdown on a larger scale might cause significant economic losses,” the paper concludes.
“If one-month full-scale lockdown is imposed on China’s largest four cities (Beijing, Guangzhou, Shanghai and Shenzhen), the four cities would lose their real income by 61 per cent and the national real income would fall by 12 per cent.
“The aggregate losses would be much larger in the extreme case in which all cities were locked down. The aggregate real income would fall by 53 per cent.”
But there are some subtle signs that authorities are starting to soften their response to rising cases as the economic consequences take their toll.
They include targeted instead of blanket lockdowns, faster and more efficient mass testing of the population and allowing some critical workplaces and factories to continue running at a limited capacity instead of shutting them down altogether during an outbreak.
“The Chinese government seems to have realised that its Zero-Covid policy has put overwhelming pressure on its economy, so it’s now tweaking its anti-Covid measures,” Peterson Institute for International Economics research fellow Tianlei Huang told Al Jazeera.
“When there is less daily life interruption, there is less slowdown of economic activity.”
Originally published as China losing $61 billion a month as authorities battle worst Covid outbreak in two years
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