In May 2020, China Declared Victory over the Coronavirus. It was a rebuttal to all critics of the Communist Party and its system of governance. That was at a time when the rest of the world was beleaguered. What was happening in China seemed a miracle. Within a year reports surfaced of people having pool parties without masks. It made everyone envy China. As days passed, it was evident that China’s Zero Covid Policy was not sustainable. It was only kicking the can down the road. That is coming true. Slowly and steadily the Virus is extracting its revenge on China. As recently as Jan 2022 I had written in an article that ‘Mass testing and tracing, strict quarantines, extensive lockdowns, travel restrictions and border closings have been the cornerstones of China’s Zero Covid policy. While the rest of the world started living with the virus, an authoritarian China attempts to live without it…people are getting fatigued and paying a high price. Economically, the policy has dampened consumption and growth during a deteriorating fiscal situation. Raw material import prices and logistics costs have been skyrocketing to eat away at profits. Further China’s political attitude in dealing with the virus has turned away export markets. Resultantly employment levels in firms has dropped anywhere between 10-50% depending upon the industry. The cost of China’s zero-Covid policy is steadily increasing. With the more transmissible virus variants yet to take hold in China, as they will, domestic economic resilience through ‘dual-circulation’ model, Xi Jinping’s economic brainchild – will fail. I have always expressed the thought that as long as the virus endures, it will debilitate China more than anyone. My belief is being reinforced with each passing day’.
Three months later all projections are coming true. The articles below are all from South China Morning Post which is probably the most staid of the Chinese publications. They indicate the real drift.
Headline: Shanghai’s symptomatic cases more than double to 824 as city rewrites records for the seventh day with 21,222 infections @ https://www.scmp.com/business/china-business/article/3173517/coronavirus-shanghais-symptomatic-cases-more-doubles-824?module=lead_hero_story&pgtype=homepage
Headline: China can’t escape economic pain of its zero-Covid policy as case numbers rise and cities brace for lockdown @ https://www.scmp.com/comment/opinion/article/3173112/china-cant-escape-economic-pain-its-zero-covid-policy-case-numbers
Excerpt: As China faces its biggest Covid-19 outbreak yet, the economic impact of the government’s strict approach will make it difficult to meet annual growth targets…There are signs the policy is being recalibrated to prepare for living with the virus, but the moderation will do little to ease growth pains in the near term. A vicious flare-up of Covid-19 cases is presenting China with its toughest public health challenge since the onset of the pandemic…March 2022 was the single biggest month of reported coronavirus infections, outstripping February 2020’s 69,500…While these numbers still look tame relative to those of developed countries which have long given up fighting the virus, they are shockingly large for China with its “zero-Covid” approach, supposed to insulate the country from the pandemic…Some policy mistakes – such as late and ineffective responses – and a lack of adequate appreciation for the higher transmissibility of the new variant are likely to blame for the current predicament.
Headline: Shanghai adds 19,928 Covid-19 cases, setting a daily record for the sixth day @ https://www.scmp.com/news/china/article/3173336/coronavirus-shanghai-adds-19928-covid-19-cases-setting-daily-record?module=lead_hero_story&pgtype=homepage
Excerpts: The outbreak in Shanghai is becoming so serious that the Communist Party sent an open letter to rally members to help front-line health workers
Headline: China starts Covid-19 mass testing for 25 million Shanghai residents @ https://www.scmp.com/news/china/politics/article/3172984/china-starts-covid-19-mass-testing-25-million-shanghai
Excerpts : The gateway city to international trade records 9,000 new cases, with total infections topping 61,000…in a world first, military transport planes have been drafted to Shanghai, as its 25 million residents undergo a three-day mass testing from Sunday, aimed at cutting Covid-19 transmission chains in China’s most developed metropolis…All of the city’s residents are required to take part in Monday’s nucleic acid testing, with positive results leading to hospitalisation or quarantine within 36 hours of the start of the exercise.
Headline: China food security: farmers in Jilin leave fields fallow as lockdown threatens corn supply @ https://www.scmp.com/economy/china-economy/article/3173149/china-food-security-farmers-jilin-leave-fields-fallow
Excerpts : Jilin province is home to 4 million hectares (9.9 million acres) of high-quality corn fields that account for 10 per cent of the national total…lockdowns have prevented farmers from tending fields and bans on interregional travel are disrupting transport of agricultural goods…Food security concerns are mounting in China as lockdowns show no signs of easing in the major corn-growing province of Jilin ahead of spring ploughing…In some parts of the province like Lishu county, an important corn production area that President Xi Jinping inspected last year, crop-straws from the previous harvest litter the ground because farmers have not been allowed to leave their houses…“There are crop-straws all over the fields now,” said Dong, whose family farms two hectares (5 acres) of corn fields in Lishu. “It is impossible to plant the seeds.”
Headline : Shanghai adds 17,007 new Covid-19 cases, setting a daily record for the fifth straight day as city undergoes more tests @ https://www.scmp.com/business/article/3173197/coronavirus-shanghai-adds-17007-new-covid-19-cases-setting-daily-record
Excerpts : Mass testing found more than 94,000 infections in Shanghai since March 1…The vast majority of Wednesday’s infected cases showed no symptoms of illness, with 16,766 of them being asymptomatic, while 311 showed symptoms.
Headline: Shanghai lockdown heaps pressure on China’s GDP growth, with ‘more uncertainties’ to come @https://www.scmp.com/economy/china-economy/article/3172590/coronavirus-shanghai-lockdown-heaps-pressure-chinas-gdp
Excerpts : China could see as much as 10 percentage points shaved off economic growth on a quarterly basis if zero-Covid continues…Beijing has set an economic growth target of “around 5.5 per cent” for 2022, but clinging to its zero-Covid strategy could slash growth by as much as 10 percentage points on a quarterly basis… raising questions over whether China can hit its lowest annual gross domestic product (GDP) target since 1991.The world’s second largest economy is facing a new challenge as virus outbreaks pop up around the country, including in its international financial and trade hub, Shanghai.
Headline : Shanghai Port operations hit by city’s outbreak, lockdown @ https://www.scmp.com/economy/china-economy/article/3172932/shanghai-port-operations-hit-citys-covid-19-outbreak
Excerpts : The city’s current controls are affecting the logistical chain on land, with drivers from neighbouring provinces reluctant to enter over quarantine fears..The world’s largest container port has been operating round the clock with workers kept inside a ‘closed loop’ bubble
Headline : Surprise Shanghai lockdown adds to China’s economic and supply chain fears @ https://www.scmp.com/comment/opinion/article/3172287/surprise-shanghai-lockdown-adds-chinas-economic-and-supply-chain?module=opinion&pgtype=homepage
Excerpts : An unexpected lockdown in Shanghai has raised concerns over China’s economic and supply chain prospects. While we think the additional impact from the Shanghai lockdown on its own might not be as substantial as some expect, what it means for the future of China’s Covid-19 strategy is still significant. The impact of the lockdown on Shanghai itself might not be that great, but it still has significance…The sight of Shanghai’s sophisticated strategy failing could lead governments with fewer resources to resort to crude, large-scale lockdowns
Headline : Coronavirus: China’s zero-Covid policy pushes cash-strapped local governments to the brink @ https://www.scmp.com/economy/article/3170983/coronavirus-chinas-zero-covid-policy-pushes-cash-strapped-local-governments
Excerpts : China is clinging to a zero-tolerance approach to the pandemic that relies on stringent lockdowns, mass testing and quarantine in government facilities…But the cost of maintaining the strategy is growing and many local governments are struggling to balance debt control with strict virus prevention measures
Headline: Missing coffins? Hong Kong’s Covid-19 deaths leave funeral agents struggling to meet demand for caskets @ https://www.scmp.com/news/hong-kong/health-environment/article/3172320/missing-coffins-hong-kongs-covid-19-deaths-leave
Excerpts : Sharp rise in deaths during fifth wave of Covid-19 has led to stolen caskets, mix-ups, insiders say…With crematoriums running overtime, funeral workers are working longer hours to meet demand
Headline : China’s tourism industry braces for Ching Ming Festival with lockdowns and travel restrictions @ https://www.scmp.com/economy/china-economy/article/3172629/chinas-tourism-industry-braces-ching-ming-festival-lockdowns
Excerpts : Residents across the country are hunkering down for another holiday where they can’t really go anywhere, or instead opt for short day trips that do little for consumption…Flight prices and bookings plunge for April as China’s zero-Covid strategy lashes the most-susceptible tourism sector…China’s debilitated domestic tourism industry could be further clobbered by weak consumption during the coming holiday as the masses refrain from travelling far and spending while record numbers of coronavirus cases continue to spur lockdowns across the country.
Headline: Non-Chinese vaccines, foreign treatment pills, self-test kits: how China should optimise its Covid policy to tackle Omicron-fuelled outbreak @ https://www.scmp.com/week-asia/opinion/article/3172807/non-chinese-vaccines-foreign-treatment-pills-self-test-kits-how
Excerpts : China incensed by Nobel laureate Paul Krugman’s comment suggesting battle to contain latest Covid outbreak stems from inherent weakness of autocratic government…Allowing for imports and manufacturing of foreign mRNA vaccines could increase China’s 40 per cent booster rate, all from domestically made shots
Headline : Pandemic and Ukraine war bring the economic decoupling nightmare ever closer @ https://www.scmp.com/comment/opinion/article/3172916/pandemic-and-ukraine-war-bring-economic-decoupling-nightmare-ever
Excerpts : Two years of Covid-19, plus the huge sanctions attack on Russia, have hardened the consensus on the need for both economic decoupling and deglobalisation..In a world split into the US and China blocs, however, Western multinationals, small companies and millions of consumers would all pay a hefty price ..Talk of deglobalisation has been fashionable for years, mainly among environmentalists angry at the carbon cost of air travel. Talk of decoupling has been more recent, spoken mainly in whispers among security-obsessed nationalists. Neither was taken very seriously, if measured by the global reach of multinationals, and steady growth in international trade and foreign investment…But two years of the pandemic, and a colossal Russian response to Vladimir Putin’s invasion of Ukraine, have aroused a deafening consensus on the need for both…At the Financial Times, Martin Wolf sadly concludes: “Economic decoupling will now surely become deep and irreversible. I see no way of avoiding this.” Adam Posen, president of the free-trade-leaning Peterson Institute, concurs: “It now seems likely that the world economy really will split into blocs – one oriented around China and one around the United States, with the European Union mostly but not wholly in the latter camp…”
Headline : China’s lockdowns drive up freight costs as zero-Covid rules bite trucking operations @ https://www.scmp.com/economy/china-economy/article/3173151/chinas-lockdowns-drive-freight-costs-zero-covid-rules-bite
Excerpts : Long-distance truck drivers are being forced to undergo arduous coronavirus testing and quarantine requirements to make deliveries..Freight costs are rising due to inefficiencies, while customers are waiting longer for deliveries and producers are struggling to ship cargo..For farmers and traders in Donggang, a county in northeast China known for its high-quality strawberries, getting ripe fruit out of town has become increasingly difficult in recent weeks…Even though the region has barely reported a coronavirus case, the local government – like most others across China – has imposed stringent rules on truck drivers entering the city as the country grapples with its most serious outbreak in two years…
Headline: China’s weak consumption over Lunar New Year may signal ‘worsening economy’, analysts say @ https://www.scmp.com/economy/china-economy/article/3166126/chinas-weak-consumption-over-lunar-new-year-may-signal
Excerpts : Deterred by the discouraging travel policies and sporadic outbreaks of the Omicron variant, more than 70 per cent of domestic tourists chose short-distance trips..A nearly 48 per cent increase in trips among migrant workers from January 17-31 did little to help boost box office receipts and tourism revenue, Nomura says
Headline: China state think tank sees ‘targeted decoupling’ in supply chains with the West as a top risk for 2022 amid rising tensions @ https://www.scmp.com/tech/policy/article/3163447/china-state-think-tank-sees-targeted-decoupling-supply-chains-west-top
Excerpts : A Chinese state think tank has listed a “targeted decoupling of supply chains” as one of the top 10 global risks in 2022, along with mutations of the Covid-19 virus, underlining how serious the issue is viewed by top scholars in the country…The list, which also includes possible US financial turmoil amid Federal Reserve policy changes and heightened tensions over the Taiwan Strait, was produced by the National Institute for Global Strategy and the Institute of World Economics and Politics, both under the Chinese Academy of Social Sciences (CASS). It indicates that Chinese academics see a partial decoupling between China and the Western world as a realistic threat as Washington continues to restrict China’s access to strategic technologies, such as advanced chips.
My Comments : The corona virus has taken root in China. Shanghai is only a start point of widespread effects which are in store elsewhere. Vulnerable population, dodgy vaccines and a rigid system are no match for the fast transmitting Virus. Slowly and steadily, the Chinese economy is getting hit. That is pretty clear from any Chinese metric – food security, supply chains, tourism, freight…. 1.4 billion Chinese people are in a pressure cooker situation. Add the issues related to Ukraine which will conflate with this . USA, India, EU and other countries have withered the worst effects of the Virus and are recovering from it while China is entering a tunnel. This situation has immense opportunities and challenges for India. Let us hope that people in the saddle are alive to this.
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