China's pandemic playbook runs low on pages

3 minute read

Attendants wearing face masks following the coronavirus disease (COVID-19) outbreak hold signs as they wait for delegates on the Tiananmen Square, after the closing session of the Chinese People's Political Consultative Conference (CPPCC) in Beijing, China March 10, 2022. REUTERS/Carlos Garcia Rawlins

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HONG KONG, March 14 (Reuters Breakingviews) - Chinese policymakers might have to add new pages to their Covid-19 playbook. Recycling tough policies from 2020 will put an aggressive “around 5.5%” annual growth target even further out of reach. read more

With financial hubs Shanghai and Shenzhen locking down as contagion surges, Chinese companies might feel a sense of disheartening déjà vu. Draconian measures adopted in Shenzhen, a city of nearly 20 million adjacent to Hong Kong, are reminiscent of 2020, when authorities sealed buildings, banned public transport, and shut malls and factories while necessities like food were often rationed and delivered by officials. read more

As a result of this tough medicine, the Chinese government reported a quarterly contraction of 6.8% in the first three months of 2020 as retail sales and fixed asset investment both slumped nearly 20% year-on-year. But suppressing the transmission rate allowed companies to restart production and ramp up e-commerce and exports, which quickly pulled GDP growth back into positive territory.

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State media took enormous pride in this accomplishment, contrasting it with botched responses in many Western countries. The downside, however, was the country was unable to re-open its borders without risking flare-ups. Now Omicron, a highly infectious variant which overwhelmed Hong Kong despite mask mandates and travel restrictions, suggests true “Covid-zero” might not be attainable.

Analysts at ANZ Bank estimate that just a one-week lockdown of affected regions could shave nearly one percentage point from nominal output this year. Officials preparing for a key Communist Party meeting later this year, when President Xi Jinping is expected to be re-elected, want to get the outbreak under control quickly. But they don’t want another recession either.

Omicron appears less deadly, and much of the population is vaccinated. There are new treatments available for the infected. At the same time the economic risk of lockdown is higher. Exports are unlikely to provide as much cushion as overseas demand cools, and the rest of the economy is still unstable. The crisis could also hit global supply chains if ports in Shenzhen get shut down. That means there is less medical necessity for harsh measures, and more downside to them. But having claimed victory over Covid-19, it’s understandable that officials are reluctant to soften their hard line now.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

- Mainland China reported 1,807 new local symptomatic Covid-19 cases for March 12, the highest daily figure in two years and more than triple the caseload of the previous day, Reuters reported citing data from the National Health Commission on March 13.

- Shenzhen will suspend public transport from March 14 to March 20, and residents have been told to avoid “all unnecessary activities” and not to leave the city unless necessary as it conducts three rounds of mass testing, Shenzhen’s health authorities said in a statement on March 13.

- In Shanghai authorities have been sealing off schools, residential compounds and office blocks as cases rise.

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Editing by Pete Sweeney and Katrina Hamlin

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Beijing, crunching economic data, interviewing high-level officials, and travelling to far-flung provinces to visit factory floors and talk to local shopkeepers. Before that, she spent nearly three years in Santiago, Chile, where she built a trade news website reporting on the produce industry – and developed Spanish as a third language alongside Mandarin Chinese and English.