The economic impact of China’s latest coronavirus outbreak could be more than 10 times that of the initial wave in Wuhan in 2020. Coronavirus-driven disruptions, including lockdowns and transport restrictions, have already affected 160 million people this year in cities with a combined economic output of CNY18 trillion, according to Xu Jianguo, Associate Professor of Economics at the National School of Development of Peking University. For comparison, the initial Wuhan outbreak two years ago affected 13 million people in a regional economy worth CNY1.7 trillion, he said.
Xu estimated China has seen more than 800,000 infections since the beginning of 2022, far surpassing the 92,514 cases in 2020. “The severity of this year’s outbreaks is more than 10 times that of 2020 in terms of the size of the affected population and economy,” he said, adding that it was challenging for China to reach its economic growth target of “around 5.5%” for this year, or even match the 2.3% growth figure recorded in 2020. To reach the growth target, more policy instruments are necessary, he said.
The government’s zero-Covid policy, which relies on lockdowns, mass testing and quarantine in government facilities, has put pressure on the service sector, retail, production and logistics. Unlike in 2020 during the Wuhan outbreak, parts of some of China’s largest and most important cities have been locked down this year, including Shanghai, Suzhou, Shenzhen, Dongguan and the capital Beijing, which are important nodes on the industrial chain, Xu said. Following a sharp decline in export growth in April, a growing number of analysts have warned reaching the 5.5% growth target will be difficult. But China’s top leaders refuse to adjust the zero-Covd strategy. Foreign business groups are saying the draconian lockdown measures are making the country a less attractive destination for investment. Despite signs of growing stress on the economy, Xu said fiscal and monetary support policies are weaker than those in 2020. Exports and the real estate sector, the major drivers of economic recovery two years ago, have also lost steam.
There was room for policy relaxation in the property sector, Xu said, adding monetary easing could be functional, but faced risks like rising inflation and exchange rate volatility. “The main reason for the cooling economy right now does not lie in social financing or monetary issues, but in Covid prevention and control,” he said, as reported by the South China Morning Post.