Cities with millions of people in lockdown, supply chains interrupted, companies are at a standstill. The strict zero-Covid measures in China are causing industrial production and consumption to collapse. How long will that go?
A Shanghai resident will be tested for the coronavirus on May 10. The economy of the trading metropolis has suffered from the week-long lockdowns.
(dpa)
The strict restrictions imposed by China’s zero-Covid strategy are slowing down the second-largest economy more than expected. Industrial production surprisingly fell by 2.9 percent in April compared to the same period last year, as reported by the statistics office in Beijing on Monday. Retail sales also fell more sharply than analysts had predicted, by as much as 11.1 percent.
According to experts, the figures indicate that the downturn this year will be stronger than expected. “The data for activity in April has revealed the damage from the lockdowns in Shanghai and other parts of the country,” Chang Shu and Eric Zhu wrote in an analysis by the finance agency Bloomberg. “The effects are much broader and deeper than expected.”
The arrival of the fast-spreading omicron variant puts China’s strict zero-Covid strategy to the test. Tens of millions of people in metropolises such as Shanghai, Changchun or Jilin Province have been in lockdown for weeks and are not allowed to leave their homes. Numerous neighborhoods in Beijing are cordoned off. Most shops and many subway stations are closed. Millions have to work from home.
The restrictions have seen a significant drop in freight traffic across the country. Supply chains are broken. Many companies had to stop or shut down production. Container transport through the world’s largest port in Shanghai has plummeted. The delivery bottlenecks will also be felt in Germany through higher prices, as experts predict. German and other European or foreign companies operating in China are also severely affected.
Despite the bad numbers, Statistics Bureau spokesman Fu Linghui tried to convey optimism to the press in Beijing. “The Covid outbreak in April had a major impact on the economy, but the consequences will be short-term.” The good long-term fundamentals of the Chinese economy are unchanged. If the Covid measures make progress and the policy to stabilize the economy shows its effect, it can be expected that the economy will gradually recover.
Fixed investment fell slightly in April, down 0.82 percent year-on-year, but rose 6.8 percent year-to-date, in line with plan. The increase reflects the government’s efforts to increase spending on infrastructure to stimulate the economy.
The Chinese leadership had set a growth target of 5.5 percent for this year. Whether the originally optimistic target can be achieved is becoming increasingly questionable, both because of the Covid outbreak and the strict measures in China and because of the setback for the global economy caused by the Russian war in Ukraine.