China’s strong policies to defeat covid have caused big changes to the Chinese economy. China has locked down multiple cities including Shanghai. These lockdowns have dealt a hefty shock to its economy, causing more issues with global supply chains and further growing inflation.
Small businesses have been hurting a lot as they are being forced to shut down causing them to struggle to generate revenue. Tesla and other big companies with plants in China have also seen a halt in their ability to produce which hurts them too. Trade also has been becoming more expensive as a result of the lockdowns as air freight rates have soared and port delays have grown.
The Chinese government refuses to find a middle ground between a 0 tolerance approach and the approach of just living with COVID. “The Omicron variant is highly infectious, and it has become increasingly challenging for China to reach its ‘zero-Covid’ objectives while most other countries opt for a ‘living with Covid’ approach,” (Ting Lu, managing director and chief China economist for Nomura). Lu believes that China’s policy regarding the virus will affect many sectors poorly and cause many issues for the Chinese and world.
The World Bank now forecasts that China’s economy will grow 5% this year which is lower than last year’s 8.1%. That is lower than China’s goal of growing over 5.5%. Many investment banks believe that the lockdowns and strict policy’s effects on the economy will spillover into the rest of the east asian region.
The Shanghai lockdowns came at a terrible time too where the economy is already struggling. In March, the Caixin Purchasing Managers’ Index (PMI) for services recorded its sharpest decline since the beginning of the Covid-19 outbreak in Wuhan in February 2020. Economists forecast that the April numbers will be even worse as the lockdowns have destroyed domestic demand. Lu believes that the excessive lockdowns have caused individuals to be worn out, unemployed, and underemployed. He also says individuals have drained their saving so much to where they must reduce their consumption.
https://www.cnn.com/2022/04/08/business/china-shanghai-covid-lockdown-economic-impact-intl-hnk/index.html
I believe that the lockdown in China and slowing down of the economy will spillover to the neighboring countries as China has invested a lot of money on its neighbors. This may badly affect countries like Pakistan and India.
ReplyDeleteI have read news about protests in China due to pandemic. I have never expected to see any protests in China, except in Hong-Kong. Hopefully, this lockdowns will not last for a long time
ReplyDeleteAccording to the article, the lockdowns consist of 13.6% of China's population. When so many people are stuck in their houses, consumer spending will obviously decrease and the economy will go downhill.
ReplyDeleteI wrote about this a couple months ago actually when China adopted their Zero Covid Policy. I predicted that this would not go well as COVID is so random at times. I can only imagine business owners located in Shanghai and had awful their expenditures are going.
ReplyDelete