Covid-19: As China’s pandemic numbers go up, economic numbers slide down

Virendra Pandit

New Delhi: China is a classic example of the phrase: ‘You are damned if you do, and you are damned if you don’t!’ Its brutal Zero Covid policy kept the factories closed and people locked at home for weeks and months until protests forced the government to abandon it in November; now, with the stringent policy gone, its hospitals are overwhelmed and factories still underperforming.

The media reports quoting a new study by researchers in Hong Kong said almost one million Chinese may die the next year from Covid-19 after the government rapidly abandoned pandemic curbs in the last few weeks.

What happened during the surging first wave of the pandemic in the US, Europe, India, and other countries in 2020 and 2021 is now happening in China in the absence of effective mass vaccination and ill-prepared health systems. Infections are likely to multiply manifold next month when the Chinese celebrate their New Lunar Year on January 22 and millions of them crisscross the country to their hometowns or tourist places.

With little effective mass vaccination booster campaign and other measures to reduce the impact of the virus, about 684 people per million could die in a nationwide reopening, the report co-authored by Gabriel Leung, the former dean of medicine at the University of Hong Kong, and two of his colleagues, said, the media reported on Thursday.

With China’s current population of over 1,4 billion, this means the probable death of nearly 964,400 people, the reports said.

“Our results suggest that local health systems across all Chinese provinces could not cope with the surge of Covid-19 cases posed by reopening in December 2022–January 2023,” they wrote in the report, yet to be peer-reviewed.

The explosive growth of infection rates nationwide could also lead to a new virus variant. A reopening that sees a high R-rate — the basic reproduction number for the virus — would “result in many infections that might speed up a mutation, selection, and evolution of SARS-CoV-2 viruses.”

As the government stopped releasing the number of new asymptomatic cases, it is almost impossible to determine China’s R-rate as evidence suggests the disease is spreading rapidly, with an eruption of infections already ripping through companies and overwhelming hospitals.

Another media report said China’s economic activity had weakened in November, even before the government abruptly dropped its Covid Zero policy. With a surge in infections in the coming months, more turmoil could push policymakers to increase stimulus.

Data showed business and consumer activity slumped to their weakest levels since the Shanghai lockdown in the spring. Retail and home sales declined, and industrial output and investment slowed sharply. Unemployment among the most vulnerable workers rose manifold.

With the government abruptly abandoning its long-held Zero Covid strategy, the outlook for the economy is uncertain as factories brace for disruption and labor shortages rise. High-frequency data are already suggesting a further slowdown in activity in Beijing and other places this month as infections spread widely.

The scrapping of many of the Zero Covid curbs let citizens move about freely as shops, factories, and restaurants remained open without fear of snap lockdowns. However, with the virus likely to sweep through a country unprepared for the mass illness and deaths that could occur, fear of infection will probably keep people confined to their homes and weigh on economic activity.

The data suggest that GDP growth may be weaker in the fourth quarter than economists initially projected and will probably remain subdued into next year, which is only two weeks away. China may grow at just 3.2 percent in 2022, the weakest pace since the 1970s, barring the 2020s pandemic slump. Goldman Sachs Group Inc. cut their outlook for GDP growth this year to 2.6 percent and raised that for 2023 growth to 5.2 percent, but economists are divided.

The People’s Bank of China on Thursday pumped more cash than forecast into the banking system at its monthly liquidity operation to help ease stress in money markets amid a selloff in bonds, which may hike inflation and spread disaffection among the people already losing jobs.

November’s data showed China’s main growth engines all weakening.

Home sales dropped 31 percent from a year earlier, worsening from a 23 percent decrease in October, a sign of a worsening property market despite recent policy support. New and second-hand home prices fell last month from October, sales of building and decoration materials tumbled 10 percent in the year, while property investment contracted almost 20 percent.

China’s domestic economy is weakening just as the global demand for Chinese goods is falling. Exports contracted almost 9 percent last month, the biggest decline since February 2020, when shipments usually rise strongly ahead of the Christmas holiday season.

“The global environment is turning increasingly grim and complex, and the domestic economy’s recovery foundation is not solid,” the National Bureau of Statistics said.