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China’s zero-COVID strategy iterates for tougher economic times
Millions of lives have been saved, but resources are stretching thin
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China is relaxing restrictions to its “dynamic zero-COVID” strategy. In recent days, health authorities rolled out changes to some of the world’s toughest control measures. But the cheers from Western business press around an alleged end to zero-COVID overstate things. China’s move is best described as a qualified easing to help sustain the strategy instead of ending it.
There are still mandatory quarantines for inbound travelers, but only for five days instead of seven – followed by three days of stay-at-home confinement which has not changed. Travelers still need a negative PCR test within 48 before departing, but now only one instead of two within 24 hours. The “circuit breaker” mechanism for inbound flights is also over, which allowed China to penalize airlines by suspending their flight routes if they brought in too many COVID cases.
Then there’s an internal shift from ad-hoc protections to more formalized, structured systems which are faster and make it easier for people to get around. Local governments can no longer “arbitrarily'' extend lockdowns, close schools, or suspend production. Regular mass COVID testing is a signature part of China’s control efforts, but in some extreme cases local governments tested residents twice per day, so the new protocols call for reducing this “unscientific” and excessive testing, while reducing the frequency of testing in areas that don’t have outbreaks. China has also loosened rules on who counts as having close contact with the infected, which lessens the impact of quarantines.
But in the southern manufacturing hub of Guangzhou, which is battling an outbreak of the highly contagious Omicron variant with thousands of daily cases and hundreds of symptomatic ones, there’s little sign of an end to zero-COVID as a rule. There are testing booths everywhere and residents of the most heavily affected districts are staying home.
“These measures are aimed at effectively containing the virus, while minimizing its impact on economic and social development and public services crucial to people's lives,” the National Health Commission stated on Nov. 14.
This, however, requires “doing away with simplistic and excessive epidemic prevention and control measures,” the NHC added.
One of the main reasons for such stringent controls this whole time: China is still a developing country with “unbalanced medical resources,” in the words of epidemiologist Liang Wannian, a key architect of the strategy. China has 1.4 billion people and there are differences between regions and cities in the scale and capacity of medical resources. Letting the virus rip would drive daily cases past 600,000 according to one 2021 estimate, pushing resources to their limits. Plus, only around half of Chinese seniors are fully vaccinated while the rate is more than 70% among American seniors.
China has a state that is effective at planning and mass mobilization. Major cities such as Beijing and Shanghai have thousands of testing stations within a 15-minute walk of practically everyone who lives there, more than 150,000 people employed as testers as of earlier this year, and thousands more Communist Party volunteers helping out.
In effect, “dynamic zero-COVID” is a nationwide insurance policy but one that effectively diminishes loss of life.
There are also different priorities. Western countries explicitly prioritized commercial interests over lives. China did the opposite and experienced three deaths per million people – the United States faced 3,180 deaths per million. Taiwan has experienced 573 deaths per million. That allowed a country with 18 percent of the world population to escape with 0.1% of the deaths from COVID. If China performed like the United States, the death toll would rise above 3.7 million instead of 5,226.
The negative side of China’s approach is the economic strain, with the country expected to miss its 5.5% GDP growth target this year. JPMorgan revised down its year-on-year GDP forecast fin the fourth quarter of 2022 to 2.7% and Citi revised down to 3.7% – citing slowing factory output, retail demand, and restaurant dining among other factors.
COVID lockdowns are adding “huge” pressure, National Bureau of Statistics spokesperson Fu Flingui said. "The impact from the triple pressures on economic operations – shrinking demand, supply shocks, and weakening expectations – is growing."
Yet, China is still the fastest-growing major economy in the world, and the numbers look comparatively rosy stacked up alongside the U.S., which may gain only a reduced 1.8% growth this year as part of a broader global economic downturn. Local governments in China for smaller regions also appear to be under particular strain that comes with the cost of scaling up mass testing networks and a huge hospital construction drive. Incessant testing comes at a cost for everyday gig workers too who miss orders and lose wages.
On the other hand, the economic effects of “long COVID,” the variety of long-term health problems persisting in some cases for years, are potentially significant in countries where COVID ran wild. In the U.S. as many as 1.6 million workers could be out of work entirely due to long COVID, according to the Brookings Institution. The overall loss in productivity could be the equivalent of four million workers out of the labor force.
“This may sound unbelievably high, but it is not inconsistent with the experiences of comparable economies,” Brookings nonresident senior fellow Katie Bach wrote. China will have a fraction of this impact on its workforce.
Different systems. Different outcomes. Among western observers, it has been unthinkable that a country would sacrifice economic growth during a pandemic. But if the alternative is a million or more lives lost and millions of disabled survivors, then such a “lying flat” approach to a virus undermines the basis of the economy in the first place – people.
Our only investment advice: Fight hard, fight well.
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