A Shift in Zero-Covid: What This Means for China’s Economy

• April 23, 2023

• Jackie Welby

On December 7th of 2022, China announced that it would relax some measures of its Zero-Covid policies after numerous protests about the strict lockdowns and their impact on China’s citizens (Kawate). The lockdowns would be put in place even if a few Covid cases were detected, and their length could vary to the point that food and daily necessities would run out (VOA News). The country had previously been known for low Covid numbers due to its early measures against the virus as other countries traversed the storm-like pandemic. According to Johns Hopkins University & Medicine, China has 1.15 Covid-19 deaths per 100,000 of its population as of December 13th, 2022. The amount is smaller than the United States’ 329.21 per 100,000 (Mortality Analyses). It is possible that China’s definition of a Covid death differs from what others use and therefore determines a limited amount of coronavirus death types to be official in their records (Stanway). The measures had not only restricted Covid’s presence and the peoples’ wellbeing, but they also had restricted China’s economy.

Economic growth set itself to a slow pace as China’s Zero-Covid policy stuck around. Despite ranking as the second-largest global economy, China’s economy shrank by 1.4% during January-March 2022 and decreased further by 2.6% in July (The Associated Press). Lockdowns had affected activity. People were forced to stay home, preventing consumers from spending as much as usual. The utilization of China’s industrial capacity was at its lowest, just as it was at the start of the epidemic. This is partly due to when Shanghai, one of the busiest ports globally with many industrial centers, would be placed in lockdown and disrupt international trade (The Associated Press). There may have been rough patches, but there is some hope to bounce back while getting over some hurdles.

According to analysts from the global financial services group Nomura, the relaxation of some policies will be an economic “positive,” but getting there will be “gradual, painful and bumpy.” (Cheng) The negative impact of Covid-19 controls on China’s economy has lessened over time. The controls went from impacting 25.1% of China’s total GDP to 19.3% as of December 5th, 2022 (Cheng). Days before the official announcement, local governments had begun their own measures to ease policies. In Beijing and Zhengzhou, people could start taking public transportation without providing a negative test result (Cheng). Businesses and consumer spendings put on hold could now continue where they left off. However, people will likely be catching the virus in China more than before.

The reopening occurs at what some may consider primetime for influenza (Mallapaty). In addition to China’s hospitals taking care of folks for mild or worse conditions, they may have to juggle an influx of people infected with the coronavirus. Even Chinese officials postponed a Central Economic Work Conference meeting due to increasing Covid-19 infections (Goh and Master). There is also a challenge in vaccinating the older demographic of China’s population. As of December 9th, 2022, 70% of China’s 60 or older and 40% of those 80 or older have gotten a third dose (Mallapaty). The elderly are at higher risk of dying when contracting the coronavirus. Pushing the seniors who are less distrustful of medical professionals to get vaccinated is seen as a good step towards easing safety concerns in the eyes of researchers worried about the “full impact” of Covid’s return (Mallapaty).

While the concerns of the new spread could have created doubt towards an economic rebound for China, the country is headed in a optimistic direction in the new year. The zero-Covid policy has attracted traders to Chinese stocks. China may have missed its 5.5% GDP growth target last year, but the country now aims for a lower goal of 5% as it adapts to the loose Covid policies (Li). As of January 9th, 2022, a total of 29 billion yuan ($4.2 billion USD) have been spent on Chinese onshore stocks by global fund managers (Shidong). The change in policy has brought positive change to China’s economy as it sets off on a path towards recovering from opening up to Covid.