Cecilia Machado: The new normality of Covid in China

Xi Jinping’s guidance at a Communist Party meeting earlier this month was clear: the country continues to unquestionably adhere to the strategy of low tolerance for Covid-19. China’s withdrawal from hosting the 2023 Asian Cup, a football tournament that would only take place in June and July of next year, fuels speculation that the country will still persevere in this strategy for a long time to come.

The control of the new wave of contagions – which took place through lockdowns and severe mobility restrictions – is already reflected in the reversal and improvement in the numbers of new cases of Covid-19, and only a few among the largest and most populous Chinese cities continue with stricter controls, as in the case of Shanghai. The other cities are rehearsing the path towards a new normality, which, in the case of China, involves mass testing, quarantines and border control.

In the background is the view that the Chinese strategy in 2020 was very successful, allowing a rapid recovery of activity at the beginning of the pandemic. The Asian economy grew by 2.2% and 8.1% in the last two years, and the success in containing Covid-19 is seen with enormous pride by the population, as it saved 1.4 billion people from the high mortality rates seen in the world, in marked contrast to the more than 1 million deaths in the United States.

For those who question the effectiveness of the Chinese strategy in the face of new, more contagious and less lethal variants — which greatly increase the economic cost of containing them —, a recent study published in Nature Medicine supports the Chinese government’s position, arguing that, without According to him, the level of immunization achieved by the Chinese vaccination campaign by March 2022 would cause a tsunami of deaths (1.55 million), overloading the health system by up to 15.6 times its current capacity to care.

According to the study, the prediction was that most deaths would occur in the unvaccinated population over 60 years of age, for which immunization remains less than ideal. About 216 million elderly people (82% of this population) have at least two doses of vaccines, of which only 164 million (62% of this population) have had the booster dose. An important precondition for any policy of relaxing the Covid-19 zero-tolerance policy is the increase in vaccination coverage of the elderly in China, something that is still expected to take months.

If abandoning the Covid zero strategy seems to be out of the question at the moment, the spotlight is on how far away from the target of something around 5.5% will be China’s growth in 2022. Several indicators point to the expected slowdown of the Chinese economy in response to the lockdowns.

Industry value added and retail sales declined for the first time since February 2020, when the pandemic began. And the real estate sector continues in free fall despite the various incentive measures aimed at it. The main positive vector of the Chinese economy —the external sector— is still growing, but at lower rates.

For the most optimistic, the hope is that, after the storm (of the lockdowns), the bonanza (of growth) will come, and that the slowdown in the economy will be temporary. For the most pessimistic, the slowdown has structural roots, and the arsenal of stimulus policies being put in place — such as massive investments in infrastructure, lowering interest rates for long-term loans and mortgages, and offsetting tax credits — is still too timid for reverse the growth destiny for the Chinese economy in the coming years.

As the world’s second-largest economy, China’s slowdown adds risks to the post-Covid global recovery, especially for emerging countries and commodity exporters.

If, for Brazil, the scenario was already challenging, with the tightening of international financial conditions and all the volatility brought by the electoral cycle, there is now a third ingredient that is as important as the others.