China’s nearly three-year policy of enacting strict lockdowns to contain outbreaks of Covid-19 came with a heavy price for the world’s second largest economy.
The question for its president, Xi Jinping, and his inner court of advisers is whether a sudden relaxation of lockdown rules brought in this week will both prevent a recurrence of the shockwave of protests across the country and turn the economy around.
In the couple of days after Beijing’s announced relaxations to the rules – including allowing people with mild or no symptoms to quarantine at home – the signs are only modestly hopeful.
A lack of effective vaccines and the fact much of the population has not had no jab or fewer than the three needed for full protection will mean that employers must cope with a workforce plagued by ill-health, possibly hitting production as much as any lockdown
State-run newspapers have welcomed new vaccines being validated by the government, but little is know publicly about how well they will work.
Meanwhile, reports that pharmacies are already running short of basic medicines such as ibuprofen are undermining public trust in the health system and its ability to protect them without lockdowns in place.
Nevertheless, Xi had little choice when he decided to ease restrictions. Not only were protesters calling for him to quit in unprecedented public outbursts, trade with the rest of the world had slumped and youth unemployment soared.
As a measure of the stagnation Beijing is now wrestling with, inflation dropped to just 2.5% in October and core inflation, excluding volatile elements such as energy and food, stands at 0.6%. The almost complete lack of domestically driven inflation reveals an economy stuck in neutral.
Last month’s export figures showed exports had contracted 8.7% from a year earlier, a much bigger fall than the 6.7% forecast by analysts and the 0.3% dip in October. Imports also fell sharply by 10.6% from a 0.7% drop in October as the domestic demand for imported soya beans and iron ore declined.
The International Monetary Fund boss, Kristalina Georgieva, said last month that it might have to trim its forecast for China’s economic growth without an overhaul of Covid restrictions. Before her comments, the IMF predicted that Chinese gross domestic product (GDP) would expand 3.2% this year and 4.4% in 2023.
Beijing’s Covid control reforms announced on Wednesday also included adjustments to the duration and scope of lockdowns, with cities required only to close off apartments and affected floors, rather than entire city blocks.
Health officials are still warning that trends in fatalities will be closely watched and they reserve the right to introduce tougher measures if needed.
However, Xi has let it be known local governments should not use the previous “one-size-fits-all” approach and health authorities can adopt the same flexible policy.
Julian Evans-Pritchard, senior China economist at the consultancy Capital Economics, said the change of heart in Beijing was unlikely to prevent a further fall over coming quarters, limiting a recovery to the second half of next year.
Source : TheGuardian