Beijing struggles to choose between economy recovery and Covid-control
China is facing a double whammy of Covid infections and economic crises, which are interlinked, and one gets worse if another is tried to be addressed. The number of new Covid cases is rising rapidly while businesses and industries are facing losses and shutdowns. There are predictions that China is expected to see more than one million Covid-related death in the coming days. At the same time, the Chinese government is struggling to impose curbs thanks to a negative impact on the country’s economy. Analysts have forecasted China’s economic growth to slump to 2.8-3.2 per cent this year, which would be the lowest in five decades.
China has for the first time officially acknowledged Covid deaths in recent weeks. This has given credibility to the reports of a heavy death toll in the country due to Covid infections. Crematoriums are busy and dead bodies covered in yellow bags can be seen lying on the floor. Even health workers are getting infected with coronavirus, leading to disruption of emergency and crematorium services. Bodies had to be kept waiting for three days before they are cremated. This gives a glimpse into the deteriorating situation in China. Institute of Health Metrics and Evaluation (IHME) has projected over a million deaths in the next year while a third of China’s population is expected to be Covid positive by April 1.
Beijing government has sounded an alarm over new three waves of Covid infections in the coming months. Wu Zunyou, the chief epidemiologist at the Chinese Centre for Disease Control and Prevention, said there are likely to be three successive waves until March 2023. The rush at hospitals, crematoriums, and social media posts are revealing that China is facing a huge health crisis that is likely to be bigger than the previous waves of Covid. “We cremated 150 bodies [in a day], many times more than a typical day last winter,” said an employee at Beijing Dongjiao Funeral Home. Another employee at Tongzhou Funeral Home said the demand was largely due to Covid deaths. “We’re burning from morning until 10pm. The furnaces can’t take it,” he said.
A few weeks ago, different cities in China had seen unprecedented protests from people over the failure of the Zero Covid policy. Protestors raised concerns over inhuman conditions during quarantines and over the loss of livelihoods.It also saw calls being made to overthrow Xi and the communist regime. While the Zero Covid policy appears to have failed in containing Covid infections, it dealt a severe blow to China’s economy. The retail sale has fallen by 5.9 per cent in November year-on-year while the slump for property investment is a whopping 19 per cent. Industrial output and fixed asset investment have slowed down to 2.2 per cent and 5.3 per cent respectively.
The abrupt shutdown of factories and even small businesses including restaurants led to huge livelihood losses. Major international companies including US-based Apple and Japan’s Renesas Electronics were forced to suspend their operations. The unemployment rate has reached 5.7 per cent while it jumped to 17.1 per cent for young people ages 16 to 24. Yet, the Beijing government continued with strict restrictions under the Zero Covid policy. Following the public protest, it has relaxed some restrictions. However, the warnings of new and dreadful covid waves have created a catch-22 situation.
Earlier, analysts had warned Beijing that its Zero Covid policy was hurting its economy and jobs in China as the restrictions reduced the demand. “Some companies, affected by the drop in orders, laid off workers to lower costs,” said Wang Zhe, senior economist for Caixin Insight Group. Now, Beijing has finally abandoned the Zero Covid policy, experts do not expect economy recovery anytime soon. Rather it continues to deteriorate. “I am expecting a big collapse in industrial production in December,” said Alicia Garcia-Herrero, chief economist of Asia-Pacific at Natixis.
Highlighting the slowdown in the Chinese economy, a report by the World Economics Sales Managers Survey has expressed the possibility of a recession in 2023. “(Chinese economy) may be heading for a recession in 2023.The lights may not have gone out, but prospects for economic growth in 2023 have certainly dimmed,” the report reads. If China reimposes the Zero Covid policy to contain damages by upcoming Covid waves, there will be a huge impact on its economy. If not, people’s lives will be in danger. It is a double whammy for China.