Pressure Mounts on China’s Zero Covid Policy as Economic and Social Costs Rise

In late March in China’s largest city, Shanghai, draconian measures were implemented; a city-wide lockdown for 26 million as a response to rising Covid cases. It is reported that 95% of the cases are asymptomatic making the confinement of 26m people seem unjustifiable. But the ruthless action reinforces Xi Jinping’s stubborn commitment to his uncompromising and so-called ‘dynamic’ Zero Covid policy despite the ever-widening and wounding economic and social costs.


Residents barricaded into their apartments, only allowed leave for testing, have been going hungry with minimal delivery of government food packages and food apps overwhelmed by the upsurge in demand. Children testing positive have been separated from parents by authorities. Drones patrolling the empty streets are used as techno-surveillance looking to punish anyone disobeying the rules. Shanghai is experiencing something of a 21st-century dystopian nightmare.


However, it is not just Shanghai. Last week, Nomura, a global Japanese investment bank estimated nearly 200m people across 23 major Chinese cities are subject to a strain of these stringent lockdown rules. The approach is defined as dynamic – supposedly allowing local officials flexibility over measures depending on regional virus levels, the Nomura data suggests otherwise.


While countries around the world adopt a living-with Covid approach China’s Zero Covid policy is now globally unique. It focuses on total suppression of the virus keeping transmission as close to zero as possible by using aggressive testing of whole cities and prudent isolation periods. The Chinese Communist Party’s dogmatic approach experienced early success in containing the virus which has become a sense of national pride. However, the early success of the policy has now certainly sailed. The stealth and transmissibility of Omicron are testing the effectiveness of the Zero Covid policy to the limits. With public impatience over economic and social costs spiralling, Xi Jinping’s refusal to tack onto a more forgiving course could generate a snowballing political issue for the Chinese Communist Party.

 

Economic Suffering


Two years of downward pressure has hurt the Chinese economy. Growth in disposable income and consumption have remained increasingly weak. China has relied heavily on international demand which provided a large 1.7% contribution to the 8.1% rebound GDP growth in 2021. Sustained weakness in the domestic components of aggregate demand has prompted concerns China will not reach its 5.5% growth target in 2022.


While media focus is on Shanghai, areas such as the north-eastern agricultural province of Jilin are suffering from potential food shortages and an agricultural crisis. Lockdowns and sealed-off villages have meant farmers do not have the factor inputs to produce effectively. It has created shortages in fertiliser, labour, and seeds just ahead of the crucial spring planting season.


Labour shortages have been intensified with many workers unable to travel from gridlocked cities. 14-day quarantine periods are then required for workers upon arrival on farms.


Fertiliser factories are struggling as measures such as roadblocks have meant transportation of materials is impossible. Green channels have been implemented to allow truck drivers to escape isolation requirements aimed to free up the deadlock. However, this has come with an enormous social cost to drivers as they are prohibited from returning home. Many have refused to work adding to the rapidly inflating transportation costs.


Stockpiles of crops such as corn and rice are running out, which may force China to increase its imports in turn increasing the already inflated global food prices. This would threaten China’s goal of an autarky in grained foods.


In the absence of intervention, these impacts could have dire long-term consequences as rising average costs will make production unprofitable possibly leading to the shutdown of many farms and migration away from the sector.


A potential agricultural crisis would come at the wrong time for China’s economy which is fragile due to its real estate liquidity crisis.


A long-term solution, according to an article in the Financial Times, would be to artificially boost future crop yields using genetically modified seeds. Although controversial in China, the agricultural issues are making approvals of genetically modified crops probable. The international genetically modified crop market is expected to grow by $45bn in 5 years.

 

Global Supply Chain Strain


Almost 30% of the world’s goods are manufactured in China therefore the disruption from their Zero Covid policy has global economic consequences.


China’s lockdowns have increased container ship congestion with many goods stuck on stationary container ships in Chinese ports. Partly caused by the restrictions on truckers creating bottlenecks in the supply chain - these inefficiencies have created increasing delays in deliveries to ports.


The delays result in higher production costs for companies across the globe which can be passed on to consumers, furthering the global rise in inflation.


The UK’s GDP growth slowed dramatically in February to 0.1% down from 0.8% in January due to a fall in car manufacturing. This was due to the reduced availability of microchips from around the world. Shanghai’s lockdown is likely to produce more shortages in high-end manufacturing products like microchips. Future shortages, limiting growth, coupled with increasing inflation means stagflation is on the horizon for countries like the UK.




 

Social and Political Dimensions – What is The Endgame?


The Orwellian governance has produced serious welfare issues with human costs that will be prevalent for decades.


The correlation between lockdowns and increased mental health issues is undeniable. China’s regularity of lockdowns has been met with a sharp decline in the well-being of its population. Analysis shows that lockdowns leave children behind in academics, the frequent lockdowns will have widened the attainment gap among Chinese children. A generation entering the workforce will be significantly more unstable and unskilled, potentially limiting their opportunities.


Political opposition to Xi Jinping’s Zero Covid Policy is rare in Chinese media due to high censorship. State media, instead, focuses on health being the most important aspect of life and that everything else in life must come after it. However, opposition is mounting after two years of consistent economic and social heartache. If China were a democracy Xi Jinping may have been ousted already.

There is a deeper significance to Xi Jinping’s adamant refusal to move to the now conventional living-with-Covid approach. Zero Covid has never been just about the elimination of the virus; it is also about a continuous ideological and cultural battle.


It is to prove a superior method of governing – one that focuses on a culture that cherishes human life in contrast to the supposedly marble-hearted and apathetic western countries. China considers the western response as a fundamental failure causing careless loss of life.


The ideological battle has needlessly intensified the commitment to the Zero-Covid policy. The actions of China’s government is about politics, not public health, in which the ideological stance has been chosen over the economic and social ramifications of strict lockdowns. Many point out the hypocrisy of a governance that promotes value of life while that same governance is preventing many in the Chinese society from living a life.


Xi Jinping’s Covid endgame remains unclear; but for the continuum of his Zero Covid policy, the freedoms of the Chinese public will remain the causality of the Communists Party’s politicisation of the virus.

 

References/Sources

https://www.ft.com/content/0fb2d57e-92d3-4d26-a0b1-a681727b0515

https://thediplomat.com/2022/01/china-will-struggle-to-escape-the-fallout-of-zero-covid/

https://www.ft.com/content/17aaf112-be52-4695-9f2d-849a50ea3c2d

https://www.ft.com/content/11d1f525-6253-4238-b0f6-500f508ec073

https://www.ft.com/content/e0380127-7602-4e62-8c7d-b7d188dff05d

https://blogs.lse.ac.uk/cff/2022/03/29/ask-the-experts-how-does-chinas-dynamic-zero-covid-policy-impact-the-global-economy/

https://www.bbc.co.uk/news/business-60761107

https://www.bloomberg.com/news/articles/2022-04-07/containers-stack-up-at-china-s-ports-as-lockdown-blocks-trucks

https://www.mckinsey.com/industries/education/our-insights/covid-19-and-education-the-lingering-effects-of-unfinished-learning


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