Even before the onset of the global pandemic, China was in the midst of an economic downturn. According to Macrotrends, for three consecutive years China’s GDP growth rate had been steadily declining from 6.75% in 2018 to 5.95% in 2019 and finally, a staggering 3.71% decrease to 2.24% in 2020. The stagnation can be attributed to three distinct factors: A slowdown in industrial production, lack of fixed investment in the housing sector, and a decline in retail sales.
Once COVID-19 erupted in the early months of 2020, the country’s economic situation took a turn for the worse with President Xi Jinping instating a series of lockdown measures which ultimately developed into the ‘zero-COVID’ policy. In this article, the aspects of China which are hindered by the ‘zero-covid’ policy are explored.
‘Zero-covid’ requires individuals to produce a negative test result each day, inhibits people from entering the capital Beijing from a city or village that has seen one infection in the past week, and requires all foreign visitors to quarantine for 7-10 days upon entering the country.
As a result, China’s economy is dwindling, with 3% annual growth expected in 2022, less than half of 2021’s at 8.1%, according to financial forecasters.
Last week at the Hong Kong stock exchange, share prices of Chinese companies listed in the US, mainland China, and Hong Kong surged as investors eagerly hoped that China would be ready to alleviate some of its restrictions surrounding the coronavirus. However, contrary to this the government again sent prices down.
Increasing lockdown fatigue
Despite an attenuation of coronavirus restrictions worldwide, China’s policies remain stringent. They have periodically seen schools, factories, and sometimes, entire cities locked down for weeks without prior warning.
In Guangzhou, an industrial city home to 19 million people, authorities urged residents to remain at home when new infections spiked for the third consecutive day. A massive testing campaign is now underway, but so far, officials have refrained from ordering a lockdown similar to the one that shut down Shanghai two months ago.
Regardless of ‘zero-COVID,’ there were more than 9,000 new coronavirus cases in China reported on Thursday, the highest number since April.
Rare public protests have been sparked due to irritation over the government’s approach and scuffles with police and healthcare workers.
Observers expect China’s leadership to stay with its policies until millions of elderly citizens are vaccinated, with Beijing not indicating that it will ease restrictions soon. With that knowledge in hand, it is entirely plausible that measures could remain in place until next spring at the earliest.
Xi retains political control
In the face of public resentment over President Xi Jinping’s “zero-COVID” policy, representatives from China’s Standing Committee vowed on Thursday to maintain Xi’s strict lockdown policy that has markedly restricted personal freedom and China’s economy.
In a statement made on Thursday, the seven-member Committee stated, "We will protect people's lives and health to the greatest extent and minimize the impact of the epidemic on economic and social development."
At a meeting of the Standing Committee, of which President Xi Jinping is chair, members stated that 20 measures would be instated to make rules less intrusive, but no details were provided.
The Committee consists of President Xi’s closest allies, appointed to their positions at the Communist Party’s national party congress. The conclusion of the congress saw Xi Jinping confirmed for an unprecedented third five-year term as the country’s leader.
What is next for China?
With lockdowns continuing to hamper China’s economic growth and President Xi’s confirmation as the nation’s leader guaranteed, it is hard to see what direction the country will move in. Will the ‘zero-COVID’ policy be rescinded if infections decrease? The answers are yet to be found for those investing in China’s future.
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