Economic return to normalcy dashed by China's zero-COVID policy

Analysts expect current downturn will be harder to shake-off than the one seen in early 2020

FPJ Web DeskUpdated: Thursday, May 19, 2022, 12:03 PM IST
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Calculations based on International Monetary Fund projections show China's expected average annual contribution to global economic growth through to 2027 at about 29 percent /China Flag | File photo

A sharp slowdown in China's economy caused by its strict zero-COVID rules and Beijing's shift away from a traditional reliance on external demand have cast doubts over how much the country will contribute to future global trade and investment, Reuters said.

While China staged a remarkably quick recovery from its initial pandemic slump, thanks to bumper exports and factory production, analysts expect the current downturn will be harder to shake off than the one seen in early 2020, the report said.

The gloomier outlook presents challenges not only for leaders in Beijing worried about rising unemployment, but foreign businesses counting on China to resume the level of engagement it had with the rest of the world before the pandemic, Reuters said.

Calculations based on International Monetary Fund projections show China's expected average annual contribution to global economic growth through to 2027 at about 29 percent. While that's a considerable addition, it contrasts with the years following the 2008 global financial crisis when that averaged closer to 40 percent, the report said.

Zero-COVID policy

Shanghai reaffirmed last week it would maintain the “zero-COVID” approach to eliminate a waning outbreak in China’s largest city after the head of the World Health Organization said it was not sustainable and urged China to change strategies.

While progress has been made, relaxing prevention and control measures could allow the virus to rebound, deputy director of Shanghai’s Center for Disease Control Wu Huanyu told reporters.

Lockdowns hit global supply chains

Supplies of Adidas sneakers and Bang & Olufsen speakers have been hit. Automakers from Toyota to Tesla are facing “unprecedented” costs and production hurdles, said Bloomberg. Sony is struggling to make enough PlayStations.

Shanghai to reopen gradually by June 1

The Chinese city of Shanghai has announced plans to reopen gradually after spending more than six weeks in lockdown and stamping out COVID-19 transmission in 15 of its 16 districts.

The opening will be rolled out in phases, state media reported on Monday, with city authorities saying “normal life” will resume on June 1.

Most of Shanghai has stopped the spread of the coronavirus in the community and fewer than 1 million people remain under strict lockdown, authorities said Monday, as the city moves toward reopening and economic data showed the gloomy impact of China’s “zero-COVID” policy.

China's export growth hits two-year low

Recession worries are swirling again as China's COVID-19 lockdowns, the Ukraine war, and the cost of living crisis all threaten the global recovery, The Guardian reported.

China's exports growth has tumbled to a two-year low, as the curbs introduced to battle COVID has hit factory production, disrupted supply chains and weakened domestic demand too, The Guardian reported.

Exports slowed to 3.9 percent year-on-year in April, the weakest since June 2020. Imports growth was flat (and imports from the US dropped by 1.2 percent), as cities such as Shanghai were shut down to fight virus outbreaks.

April's data shows the impact of China's latest COVID restrictions, including the tight lockdown in Shanghai which have lasted six weeks, disrupting the operations of companies including Tesla and Apple.

April exports to sanctions-hit Russia plunge, imports surge

Chinese exports to Russia fell in April for the second month as China's northern neighbor grappled with economic sanctions, while Russian shipments to China surged, a balm to hard-hit Russian firms facing international economic isolation.

Shipments to Russia fell 25.9 percent in April from a year earlier in dollar terms, worsening from a 7.7 percent decline the previous month, according to Reuters calculations based on customs data on Monday. Imports from Russia, however, surged 56.6 percent in April, compared with an increase of 26.4 percent in March.

Omicron wave forces China to postpone Hangzhou Asian Games

This year’s Asian Games scheduled to be held in Hangzhou in September is set to be postponed, Chinese state media reported.

The move comes as China battles COVID-19 outbreak recently. Speaking to China Central Television an official confirmed that the date will change. Many events in China have been delayed due to medical emergency.

The decision has been taken following an agreement between Chinese Olympic Committee (COC) and the Hangzhou Asian Games Organising Committee (HAGOC), the Olympic Council of Asia (OCA) Executive Board (EB).

(With inputs from Reuters, Agencies)

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