China waits on ‘miracle’ to exit Xi Jinping’s zero-Covid

In Shenzhen, one of the world’s most important technology and manufacturing centres, all it took was 35 coronavirus cases for officials lock down swaths of the city of 17.5mn people.

Since Sunday, partial lockdowns, mass testing campaigns, public transport suspensions and school closures have been imposed across a number of Chinese cities, including Chengdu in the south-west and Harbin and Tianjin in the north-east.

Yet experts believe President Xi Jinping’s zero-Covid policy will continue into 2023, until Chinese scientists develop vaccine technology to stop Covid-19 from spreading or for a dominant mutation to emerge with significantly less severe health consequences than the Omicron variant.

“It will require some miracles,” said Chen Long, a partner at Beijing-based consultancy Plenum. “They’re hoping for a ‘super vaccine’ that’s going to be much more effective than the current ones anywhere in the world. Or, for the virus to evolve and becomes less fatal.”

But Xi’s relentless efforts to rid China of the coronavirus are taking a huge economic toll.

The zero-Covid’s policy’s impact on consumer sending will shave 1.6-2 percentage points off gross domestic product growth this year, according to an analysis by French bank Natixis, based on a calculation of retail sales and intracity mobility compared with pre-pandemic levels.

That will pile the pressure on Beijing’s economic planners as they chase Beijing’s GDP growth target of 5.5 per cent — its lowest in decades. The real cost is likely to be even higher, said Alicia García Herrero, chief economist for Asia-Pacific.

She noted that the estimate did not include the impact of worsening market sentiment reverberating across the housing sector and falling investment in the world’s second-biggest economy.

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On Wednesday, China’s official purchasing managers’ index showed manufacturing activity shrunk for the second-straight month, reflecting the property sector downturn and a crippling drought.

The latest series of lockdowns and other controls comes ahead of the Chinese Communist party congress starting on October 16, at which Xi is expected to secure an unprecedented third term in power.

Following the congress, Xi is expected to attend the G20 Summit in Bali in November, according to Indonesian president Joko Widodo. The trip would be his first outside mainland China since the coronavirus pandemic began in early 2020, and a potential signal that Beijing might soften its border restrictions.

Some analysts have predicted that zero-Covid could be dropped after the party congress. But the antivirus strategy is increasingly seen as a test of the party’s legitimacy and too closely attached to Xi, the country’s most powerful leader since Mao.

“Shifting away from the zero-Covid policy right after the party congress will look like he is not totally in charge, like he was forced to back away from one of his signature policies right after a leadership transition . . . Letting it go will be a very gradual process,” said Xinran Andy Chen, a senior analyst at China consultancy Trivium, based in Shanghai.

Policymakers in Beijing will probably tweak the policy instead of making fast or sweeping changes, added Chen.

This would be similar to the adjustments made in June and July in response to falling infection rates and the Omicron variant’s shorter incubation period, when authorities shortened the quarantine and control periods for incoming travelers and close contacts of those who tested positive for Covid-19. Customs officials also stopped collecting blood samples from inbound international passengers.

“They’re basically trying to fine-tune the zero-Covid playbook to make it less disruptive,” Chen said, adding: “That said, any policy loosening can and will be snapped back at a moment’s notice if a local outbreak gets out. of control.”

Underlining Xi’s stubborn adherence to zero-Covid are fears over China’s healthcare system, which in many parts of the country is unprepared to deal with sudden or mass patient influxes.

Chen Gang, a China expert at the National University of Singapore, said Beijing was closely monitoring as other countries moved to ditch their pandemic social controls.

Many international commentators have criticized the slow pace of China’s vaccination campaign for its elderly population and the government’s refusal to accept messenger RNA technology from abroad that was used to produce the BioNTech/Pfizer and Moderna jabs. They say Beijing has put nationalist pride ahead of common sense policymaking.

But Plenum’s Chen Long said the debate over the effectiveness of China’s vaccines compared with leading western jabs “really misses the point because it has become pretty clear that no vaccine in the world is able to protect people from getting Covid”.

“Let’s assume all Chinese people have Pfizer, three doses . . . there are still going to be a lot of people infected, and a 0.3, 0.4 per cent death rate. Those numbers are still going to be unacceptable for the Chinese leadership.”

Additional reporting by Gloria Li, Eleanor Olcott and William Langley in Hong Kong and Maiqi Ding in Beijing.

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