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Empty streets in Shanghai during the lockdown in April.
In the first two years of the COVID-19 pandemic, the strict anti-epidemic policy brought great benefits to the Chinese economy—while the whole world was plagued by the epidemic, China maintained a roughly normal economic order internally, and international orders flooded into China, prompting exports in 2021 A substantial increase of 21.2%.
However, in 2022, the plot reversed. With the attack of Omicron, which is more powerful in transmission, most parts of the world choose to coexist with the virus and relax restrictions. China still strictly controls the epidemic prevention.
The choice of “clearing” the epidemic prevention policy faces increasing economic costs. The Chinese Premier even thinks that the situation is worse than when the outbreak first broke out. It is not an exaggeration to say that in 2020, although the impact was severe, it quickly returned to normal after the first quarter. In the past year, from spring to winter, the epidemic has repeatedly occurred, and the city has been closed one after another.
Although the Chinese government continues to adopt fiscal and monetary policy adjustment plans, some netizens described, “If you don’t let go of the hand that is holding your neck, no matter how much you use the medicine, it will not get better.” The full recovery of China’s economic confidence depends almost entirely on when this hand is let go.
However, after the winter, this hand was quickly let go within a week or two, which also put the economy on a bumpy but more promising recovery road at the end of the year.
Spring: Shanghai is closed, the impact spills over
In 2022, a decisive day for the Chinese economy will take place on March 27-Shanghai announced the “blockade” of districts and batches. China’s largest city, which has been regarded as a model student of epidemic prevention by the outside world, has not been able to resist the mystery Keron.
However, for the Chinese economy, Shanghai is too important. Taking the semiconductor industry as an example, a quarter of the entire industry is located in Shanghai, which covers almost the complete link of the entire semiconductor industry, so that Huawei’s Yu Chengdong said that if Shanghai continues to fail to resume work and production, after May, all technology industries Those involved in the supply chain in Shanghai will be completely shut down, especially the automobile industry.
A study by the Chinese University of Hong Kong reflected the economic cost of the city closure. The study used monthly changes in intercity truck traffic to calculate real income changes in each city to demonstrate the impact of the city closure on the economy. The research speculates that if a megacity like Shanghai implements a two-week lockdown, the impact on China’s GDP for that month will be about 2 percentage points. If calculated based on last year’s data, the loss of this closure will be about 190 billion yuan, of which about 7% came from the indirect economic losses caused by the local closure of the city to other cities.
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During the closure of the city, Shanghai transformed a convention and exhibition center into a square cabin hospital that can accommodate 40,000 people.
Just as Shanghai was locked down, a piece of economic data from a neighboring country triggered discussions on the Chinese Internet. Vietnam’s exports in March set a record and soared month-on-month. Compared with Shenzhen, its total exports in the first quarter exceeded Shenzhen’s by as much as US$27.75 billion. Among them, the data gap in March is even greater, almost twice that of Shenzhen.
Although many analysts point out that Vietnam is a country with a population of nearly 100 million, and Shenzhen is a coastal city with a permanent population of 17.5 million, Shenzhen, as China’s most important technological innovation and manufacturing base, is a leader in China’s economic development. And in the past 30 years, it has ranked first in the foreign trade volume of cities in mainland China.
While this set of data surprised online public opinion, they are also discussing the cost of China’s epidemic prevention. On May 10, Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization (WHO), made a rare statement saying that China’s “zeroing out” epidemic prevention policy is unsustainable.
China has not changed its strict anti-epidemic policy of “zeroing out”, and has continued to reiterate the importance of “zeroing out” on many high-level occasions.
However, saving the economy is starting to take on more urgency. On May 25, the State Council of China held a national teleconference on stabilizing the economy. Many officials participated in the meeting—from central ministries and commissions, to provinces, cities, and even districts and counties. Some media estimated that more than 100,000 officials participated in the meeting. .
The description of China’s economic situation at the meeting also exceeded public expectations. Li Keqiang said that the current difficulties are in some respects and to a certain extent greater than those when the epidemic hit in 2020. He asked all localities to do their best to help companies with bailout policies.
Louis Kuijs, chief Asia economist at S&P, said there was little point pumping money into the economy during the lockdown if businesses couldn’t expand or people couldn’t spend.
Summer: successive bans
The unblocking of Shanghai on June 1 made many people breathe a sigh of relief, and began to work hard to restore the economic growth lost in the second quarter.
But after a little respite, the epidemic struck again.
Throughout the summer, tourism in various places picked up significantly, and domestic tourism picked up sharply. In July and August, many tourist provinces such as Hainan, Tibet, Xinjiang, Qinghai, and Yunnan continued to experience epidemics and implemented static management one after another, which once caused a large number of tourists to stay.
The epidemic in the tourist province has not yet completely subsided, and outbreaks have occurred in Sichuan, Guangdong, Hebei, Liaoning and Guizhou.
Sanya, a tourist city in Hainan, China, implements global static management. The sudden closure of the city has caught many tourists off guard.
The successive blockades have affected the confidence of multinational companies in China. According to a survey released by the American Chamber of Commerce in China (AmCham China), nearly 60% (58%) of the interviewed American-funded companies in China have lowered their revenue forecasts for 2022, and more than half (52%) of the companies said that their investment plans in China have been postponed or planned Reduce investment.
Colm Rafferty, chairman of the Chamber of Commerce, said that companies “stand at the end of the tunnel but can’t see the light.” If China’s existing epidemic prevention measures continue, multinational companies will evaluate other parts of the world as alternatives.
Xing Ziqiang, an economist at Morgan Stanley, said in the report that the continuous implementation of the blockade sends a clear message that China is prioritizing the containment of the epidemic over the economy, and adjustments to the epidemic prevention strategy may be delayed.
On July 15, China’s National Bureau of Statistics released data showing that GDP (gross domestic product) in the second quarter of 2022 will only increase by 0.4% year-on-year. It is almost hopeless to complete the annual growth target of 5.5%.
A large number of second- and third-tier cities in China have spent this summer in the midst of risk control. Xu Tianchen, an economic analyst at the Economist Intelligence Unit (EIU), reminded that the operating conditions of small businesses are particularly worrying. From the statistical data, the operating income of enterprises has dropped significantly. Small business owners have been hit harder by the anti-epidemic measures, many of whom are at risk of having to close their doors amid the sudden and severe lockdown.
Autumn: More Prosecutions and the “Twenty”
September 1st is the day when primary and secondary school students in China start school, but on that day, Chengdu announced that all residents “stay at home in principle”, becoming another city with a population of 20 million that has been closed after Shanghai.
Chengdu’s economic volume is about half that of Shanghai’s, and its population is not much different. Chengdu’s resident population is 21 million, which is less than Shanghai’s 25 million. But Chengdu is an important southwestern central city, and the hub is of great significance. In 2021, Chengdu’s Shuangliu International Airport will handle 40.117 million passengers, ranking second in the country.
Secondly, Chengdu, as a major consumer city, has just experienced the crisis of power cuts and shutdowns, and then entered a state of blockade. For residents’ consumption, it has experienced a double blow.
Since the closure of Shanghai, public opinion has increasingly expected that after the end of the “Twentieth National Congress” of the Communist Party of China in the fall, the strict “clearing” policy will come to an end and the pace of gradual liberalization will begin.
But before the “Twentieth National Congress”, the Communist Party’s newspaper “People’s Daily” published a commentator’s article signed by “Zhong Yin” for three consecutive days, emphasizing that “dynamic clearing” is “sustainable and must be persisted.”
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When the “Twentieth National Congress” officially kicked off in October, the first thing the audience noticed was that Xi Jinping’s report once again emphasized “persisting in dynamic clearing and unwavering”, referring to China’s “people’s war, general war, and blocking war against the epidemic, It protects people’s life safety and health to the greatest extent.”
So far, according to BBC statistics, from March to October, 152 prefecture-level cities in China have been partially or completely blocked, affecting a population of more than 280 million, but 114 of these cities are near the “Twenty Big” It is blocked from August to October.
The capital, Beijing, is pretty much the only major city not in full lockdown. Beijing residents have observed half-jokingly that Beijing does this by locking down the rest of the country if necessary.
Through strict “clearing”, China has undoubtedly controlled the spread of the epidemic and ensured a low death toll. However, as the cost is getting higher and higher, the balance of public opinion is tilting.
Winter: Protests and sudden relaxation
Another decisive moment occurred on November 24, 2022, when a fire broke out in a high-rise residential building in Urumqi, Xinjiang, killing 10 people and injuring 9 others.
As most areas of Urumqi have been under blockade since August 10 due to the epidemic, many people on Chinese social media questioned whether the blockade measures hindered the rescue, and expressed anger and dissatisfaction. Chinese official media reported that the Jixiangyuan community where the fire broke out is a low-risk area for the epidemic, and residents can go downstairs for activities.
Then, dissatisfaction that had been simmering for months suddenly erupted in the aftermath of the fire. Protests broke out on the streets of Urumqi, and the protests spread across the country on the evening of November 27, which is rarely seen in China in recent years.
Anti-blockade protests erupt across China
After this round of protests, the Chinese government, which has long insisted on strict “zeroing out”, ushered in a rapid turnaround within a few weeks.
On December 7, 2022, the State Council of China issued the “New Ten Measures” for the new crown epidemic, allowing asymptomatic or mild symptoms to be isolated at home, requiring the guarantee of drug supply and increasing the vaccination rate of the elderly, and no longer inspecting cross-regional migrants Health code, etc. On December 13, the trip code, the most important epidemic monitoring tool, was also offline.
However, if the “big hand” holding back the economy is suddenly released, the economy may suffer short-term shocks instead.
On December 9th, the streets of the capital Beijing were unusually quiet. Although Beijing lifted the restriction on showing negative nucleic acid certificates for taking subways and buses, many seats in the subways were empty during the peak hours on Friday night.
Some companies are even unwilling to follow the government’s guidance and abandon the epidemic prevention restrictions. For example, Haidilao, a chain hot pot brand, also requires its employees to undergo nucleic acid testing.
The concern of the company is not unreasonable. An executive of the largest supermarket in Beijing said, “More than half of the employees in our mall and hotel are positive.” The executive said that the mall is still open, but has to put The remaining staff members are divided into two groups and go to work in batches.
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On December 6, the epidemic prevention policy was suddenly relaxed, and there was only one customer dining in an empty restaurant in Beijing.
The persistent anxiety about the epidemic in the past three years has made China’s economic recovery not as fast as expected. Lu Ting, Chief Economist of Nomura China, said, “A country’s impact on the current economy cannot be underestimated when the number of infection cases is rising rapidly, especially when the people still have a certain fear of infection.”
Capital Economics senior China economist Julian Evans-Pritchard (Julian Evans-Pritchard) believes that China will take quite a long time to adapt to living with the virus, and consumption activities may be between 3 and 6. It will be months before returning to a “similar to normal state”.
“So, in the medium term, even though the ‘zeroing out’ policy shift will benefit most businesses, it will not provide immediate relief (of economic distress) and the next few months will remain very challenging.”
However, the boost to consumer confidence from the easing of restrictions was immediately apparent. Chinese travel booking sites Ctrip and Qunar said searches for air tickets to cities such as Sanya and Harbin jumped seven-fold as soon as the announcement of the relaxation of the epidemic prevention measures was announced, with many hoping to make a long-lost trip around the Lunar New Year holiday. travel.
According to Morgan Stanley’s analysis, economic growth may not be satisfactory in the short term, but growth will improve next spring, and a more meaningful rebound will occur in the second half of next year. The annual growth in 2023 is estimated to reach 5%.
China has set a growth target of 5.5% this year, but under the repeated impact of the epidemic, it is expected to achieve a growth rate of about 3%.
“Lockdown means people can’t travel, they can’t spend, they can’t work,” said Rich Nuzum, president of Mercer’s global wealth and investment business. much greater impact.”
Pang Ming, chief economist for Greater China at Jones Lang LaSalle (JLL), reminded that the reopening may bring inflationary challenges to China, with a surge in demand, especially the accelerated recovery of household consumption, and the rapid rise in confirmed cases. , there will be short-term disruptions to labor, production and supply chains.
Experts are generally optimistic about the opening up of China’s economy. Although it may suffer short-term setbacks, it will recover “meaningfully” in the long run.
China’s “New Ten Measures” for the prevention of the new crown epidemic has been implemented for a week, and the people of Beijing are also experiencing some chaos when they regain their freedom.