Doha: China is where COVID-19 was first discovered in late 2019 and experienced the first wave of a pandemic in early 2020. In response, China has conducted hard lockdowns, extensive testing, and contact tracing. This strategy has become known as “Covid-Zero” because it aims to reduce the virus community infection to zero. Covid-Zero was very effective in suppressing the early waves of the pandemic, reducing infection numbers to low levels and then maintaining them from 2020 to 2021. This allowed China’s economy to reopen and grow stronger than any other country. Major economies over the last two years.

Unfortunately, Covid-19 has evolved into a much more infectious Omicron variant, arriving in China in early 2022. Omicron could also circumvent some of the protection provided by the Chinese vaccine, and new cases of Covid-19 surged to levels. Not seen since 2020.

Delayed response meant that hard lockdown and extensive social distance measurements were needed again to suppress the virus. This included an unprecedented blockade of millions of people in Shanghai for almost two months and strict restrictions on movement in other regions. The blockade targeted regions that generated 40% of China’s GDP and shipped 80% of its exports. This great effort led to a significant economic slowdown, but it also meant that new cases peaked in April 2022 and then returned to low levels. China has shifted its focus to the cat and mouse approach.

Despite Covid-Zero, new infections continue to emerge in China because Omicron is highly infectious and can avoid vaccines. As a result, authorities engage in a constant game of “cats and mice”, tracking the virus with testing and contract tracking, and quarantining it through centralized local lockdown to eliminate the virus.

Implementation of this cat-mouse approach involves setting up tens of thousands of test booths in China’s urban and economic centers. This approach is especially noticeable in China’s two largest cities, Shanghai and Beijing, and China’s technology hub, Shenzhen. The investment in testing highlights China’s commitment to Covid-Zero. This is the only national approach in the world that contains highly infectious Omicron variants.

The cat and mouse approach is far less damaging to economic activity than hard lockdown, but it imposes lasting costs and represents a significant headwind for China’s GDP growth. Goldman Sachs estimates the current cost of testing to be approximately US $ 30 billion. This is less than 0.2% of China’s 2021 production, but Nomura analysts say that if small cities follow, and 70% of the population is tested every 48 hours, the cost will rise to 1.8% of GDP. I presume that there is a possibility. In addition, Soochow Securities analysts estimate that current regulations could reduce China’s annual growth rate by 1.1 percentage points.

Chinese officials are under great pressure to curb the pandemic and drive an economic recovery ahead of the party convention in the second half of this year. In fact, in a recent speech, China’s Deputy Prime Minister Liu He reassured the public that the government would not allow a “hard landing” of the economy. He announced steps to help not only support the struggling real estate sector, but also “finalize” the tightening cycle of business regulations that has caused uncertainty and losses in the Chinese stock market. However, these policy stimulus measures in the form of tax cuts, increased government spending and monetary easing have not yet been particularly effective in driving growth.

In conclusion, the cat and mouse approach to China’s Covid-zero strategy was effective in reducing new infections to low levels. However, this is quite costly and acts as a sustained headwind to GDP growth.

Countering this is a policy stimulus that may provide some support to the economy, but this stimulus has so far been less effective.

The combination of Covid-Zero’s headwinds and relatively ineffective policy stimulus means expecting a weak economic recovery in China. More specifically, due to these two factors, China’s GDP growth rate is expected to remain at 4.8% in 2022 and 5.3% in 2023, well below the pre-pandemic trend.

Source link

Previous article[Opinion journalism]
Next article21-year-old man arrested on suspicion of assaulting another man with a knife, latest Singapore news