The number of daily Covid-19 cases in China rose to record numbers in the past week. In Beijing, most offices, shops and restaurants are closed and the streets are nearly deserted. Covid-testing has been moved inside residential compounds, as thousands have been sent to quarantine camps. In Beijing, the daily number of symptomatic and asymptomatic cases combined increased from 1,438 on November 21 to 4,386 on November 28, while nationally the numbers rose from 27,899 to 38,421 respectively, as reported on November 29.
Schools in Beijing have switched to online teaching and residents of several districts have been asked to limit their movements. Hundreds of buildings are in lockdown all over the city. Anyone arriving in the city will have to take three PCR tests over three consecutive days. Some office buildings in Chaoyang, a district with a population of 3.45 million, have capped the number of employees allowed into their offices. One notice in the central business district set a limit as low as 5%. “The omicron variant BF.7 has become the main strain in Beijing, with the characteristics of being extremely infectious and easily concealed,” Liu Xiaofeng, Deputy Director of the Beijing Center for Disease Prevention and Control, said.
The Covid-19 booster vaccination rate of those aged 80 and above is less than 30%, based on the data collected from the latest outbreak in Beijing, and the city is at the most critical moment of fighting Covid-19, Beijing officials said at press briefing. Starting from November 24, residents in Beijing should present a 48-hour negative nucleic acid test before entering public places, or when taking public transportation. Most shops and restaurants are closed.
Shijiazhuang in Hebei province returned to daily testing after a week with no tests after two confirmed and 639 asymptomatic cases were reported. In Shanghai, all passengers entering the city from other provinces will be banned from entering restaurants, shops and other public places for five days after arrival, but they will be allowed to take public transport and go to work. They will need to be tested five times. The local government of Urumqi, capital of Xinjiang, denied claims that the doors of a 21-floor building were locked when a fire broke out, killing 10 residents and injuring nine. The local government said it has set up an investigation team and will severely punish whoever is responsible for the accident.
China’s economic growth next year appears to entirely hinge on a potential exit from its zero-Covid policy, and even if such a shift occurs, more pain is inevitable before the real recovery, according to economists. Even as stringent lockdowns, mass screenings and quarantine controls continue to weigh on people’s livelihoods while depleting local governments’ finances, most economists do not expect China to fully reopen until after the meeting of the National People's Congress (NPC) in March. “In the face of the zero-Covid policy, all of the other policies to boost the economy are powerless,” said Lu Ting, Chief China Economist at Nomura, who projects a 4.3% growth rate for the Chinese economy in 2023. But Lu cautioned against blindly expecting a rapid economic recovery even if China does fully reopen towards the end of the first quarter next year.
“When the infection number quickly soars, it will be a big blow to the healthcare system and the whole society,” Lu warned. “Large-scale infections will have a negative impact across consumption, production and logistics.” He added that the biggest benefit of a reopening – a recovery of consumption, especially in the services sector – might then only occur in the third or fourth quarter of next year.
Economists from Goldman Sachs estimate that there is a 60% probability on China reopening in the second quarter, with a 30% chance for an earlier exit. They anticipate that investment will stay strong in the first half of the year, while consumption and services will become the main economic drivers in the second half, contributing to a 4.5% growth in China’s gross domestic product (GDP) in 2023. The Chinese authorities have yet to give any official indication of when or if they will end the “dynamic” zero-Covid policy.
Some 21.1% of China’s total GDP is now under lockdown, up from 9.5% a month ago, according to a Nomura report. Nomura estimated that more than 30% of the country’s GDP will be under lockdown within the next couple of weeks, while economic growth in the fourth quarter will turn negative as a result. “As local officials step up mass testing and implement frequent partial lockdowns to stamp out the virus, there has been a broad-based deterioration in mobility and business indicators so far in the fourth quarter,” Nomura said. “The contraction in most indicators was even worse than in the second quarter, when Shanghai and a couple of other cities were under blanket citywide lockdowns.” Macquarie Economists said that while they expect the economic impact to be less severe compared to April and May, the toll will still be heavy. Domestic flights, subway trips, box office receipts and floor space sold are all showing declines. The International Monetary Fund (IMF) called for a “recalibration” of China’s zero-Covid strategy to bring the world’s second-largest economy back on track.
The People's Bank of China (PBOC) announced it will cut the reserve requirement ratio (RRR) for banks to boost financing of the real economy and buffer the economic impact of a rise in Covid-19 cases. The RRR will be cut by 0.25 percentage point on December 5, which will release about CNY500 billion in long-term funds. China last cut the RRR in April by 0.25 percentage point.
Strict coronavirus restrictions are forcing desperate Chinese farmers to destroy their crops because they are unable to sell their produce, highlighting the heavy economic toll of stringent restrictions and the potential threat to food security. Local media have reported that farmers across China are struggling to sell their harvest because regional virus controls are preventing travel through many rural areas.
This overview is based on reports by the China Daily, Shanghai Daily, Global Times and South China Morning Post.
