China’s Covid confusion

With an unplanned exit from the draconian Zero Covid policy, China has ensured it won’t remain in the driver’s seat of the global economy

Covid, China, Zero Covid policy, Covid 19, Pandemic, Opinion
Barring China, practically the entire world has also come around to the view that periodic surge and geographically localised episodes of Covid-19 are unavoidable.

By Amitendu Palit

China’s management of the Covid-19 pandemic has been baffling. While almost all countries have been rapidly relaxing Covid-19 controls from the beginning of the year, China has been tightening them. It is only very recently, after large scale social protests, that China has relaxed some controls. Whether it will continue to progressively relax is difficult to predict. 

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China’s ‘zero-Covid’ strategy underpinned zero tolerance for Covid-19. It meant pulling out all stops for snuffing out the virus and preventing its transmission. In terms of policies on-ground, the strategy meant persistence of lockdown and containment month after month in China. Whenever and wherever the virus was spotted, vast areas, sometimes entire provinces, were isolated with residents being practically put under house confinement and subjected to repeated and rigorous testing. 

The pursuit of a zero-Covid strategy demonstrated the unwillingness of the Chinese authorities, more specifically the most powerful decision-making body in China—the central committee of the politburo of the Chinese Communist Party (CCP)—to refuse to accept the option of co-existing with Covid-19. The rest of the world found this bizarre. Almost all major countries and economies of the world have recommenced normal functioning of economic, social and institutional processes on the back of vaccination and degrees of herd immunities achieved by the local populations from previously contracted infections. 

Barring China, practically the entire world has also come around to the view that periodic surge and geographically localised episodes of Covid-19 are unavoidable. The unavoidability makes severe controls on social interaction and people’s movements, like those in China, futile and meaningless.   

The most persuasive explanation of China’s persistence with the zero-Covid strategy is the perceived fear that relaxation of controls would lead to a rapid rise in Covid-19 induced deaths. The apprehension arises from lack of adequate vaccination coverage among the more vulnerable age groups of the society. 

China has been a frontrunner in manufacturing vaccines, with Sinovac and Sinopharm being the two most popular ones. While more than 90% of its population is vaccinated, less than 60% of the population has received vaccine boosters. 

Furthermore, less than half of the population aged 80 years and more has been administered vaccine boosters. The situation reflects a pronounced vaccine hesitancy on part of some sections of the population, notably the aged. Such hesitancy points to the high vulnerability of these groups to the virus making the CCP reticent in moving ahead on a path of sustained liberalisation. The reticence also stems from the understanding that Chinese vaccines have been found to be comparatively ineffective than other vaccines in preventing serious illnesses and deaths from Covid-19.

Unprecedented public protests against the strict containment policies forced China to introduce some relaxations in the policies since last month. These are, however, mostly nominal in nature. While some testing requirements have been relaxed, along with quarantine protocols, China remains miles away from the pre-Covid normal. But unless it is able to take a clear view on how to come out of the zero-Covid strategy, it might be heading for serious economic difficulties.

The year 2022 was significant for the CCP and China. Xi Jinping was confirmed as the president of the country and the Head of the Standing Committee of the politburo of the CCP for an unprecedented third term. His authority over China is now unquestioned. Hardly any Chinese Head of State since World War II, except Mao Tse Tung, has enjoyed as much power as president Xi wields now. While his pole position in China’s politics and policies has been undisputedly established, on the economic front, the year has been unusually grim for China. 

The stringent Covid policies have constrained internal production and cut off China from the rest of the world. The resultant economic costs have been significant. With a projected real GDP growth rate of 3.2% in 2022, China will be experiencing one of its lowest economic expansions since 1980. With economic momentum slowing, the ability of the economy to shed debt—particularly private debt, which is almost 200% of GDP with the majority being held by the non-financial corporate entities—is challenged. The prospects look more challenging with general government debt having increased to more than 75% of GDP.   

Consolidation of political authority by president Xi and persistence of the zero-Covid strategy were clearly interlinked themes. The latter was deemed necessary for the former. Relaxing Covid-19 protocols before the CCP Party Congress in October 2022 would’ve increased Covid fatalities, creating questions over president Xi’s credibility. Mounting popular frustration over the policies was therefore overlooked. But after the Party Congress, with the discontent mounting further, the nightmare of the Tiananmen Square protests and violence of 1989 being witnessed again, could no longer be dispelled. 

Notwithstanding the beginning made in lifting controls, worries over the virus badly hitting unvaccinated groups and severely testing a public healthcare system unprepared for tackling a heavy surge continues to create confusion in China over timing the exit from zero-Covid. The confusion will exacerbate economic costs. It will take time before China recovers well enough to invest deep in growth-inducing sectors like infrastructure and real estate that have been the key drivers of production and consumption in the economy. Furthermore, as several countries work on reducing sourcing dependencies on China, its exports will suffer in the medium term. China might not remain in the driver’s seat for the global economy, both as a producing powerhouse and market for final demand, in the foreseeable future.

(The author is senior research fellow & research lead (trade and economics), Institute of South Asian Studies, National University of Singapore. Views are personal)

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First published on: 29-12-2022 at 04:00 IST
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