The strict lockdowns as a result of the Omicron wave are increasingly troubling the Chinese economy. Retail collapses, exports fall and unemployment rises. Nevertheless, there is no sign of turning away from the “zero Covid” strategy. Rather, the Chinese leadership is sticking to its policy for ideological reasons.
The economic impact of the Chinese government’s “zero Covid” strategy is now being felt. And they are harder than expected. Since lockdown in the 26-million metropolis of Shanghai began on March 27, industrial production in the country has fallen by 2.9 percent compared to the same period last year (April), while retail has fallen by as much as 11.1 percent over the same period Percent. Analysts had suspected the fall in retail could settle at six percent minus.
The climate had already clouded over in March, a development that coincides with the outbreak of the omicron wave: Shanghai recorded the first case on March 1st. In the meantime, the lockdown in the port city has been relaxed somewhat, and the authorities have also announced that they will end the lockdown completely on June 1st. Along the way, retail, department stores and supermarkets should be allowed to open again. Markets should also be able to offer fresh goods again, but with a limited number of visitors.
Alexander Görlach is a Senior Fellow at the Carnegie Council for Ethics in International Affairs in New York. The PhD linguist and theologian teaches democratic theory in Germany, Austria and Spain as an honorary professor at Leuphana University. In the 2017-18 academic year, he was at National Taiwan University and City University Hong Kong to conduct research on China’s rise. He is currently researching new technologies at the University of Oxford’s Internet Institute and how they are used in democracies and abused in dictatorships.
While the Communist Party is slowly granting the residents of Shanghai freedom again after seven weeks of strict lockdown, the picture in the capital Beijing is different. Tough measures are still in place here, which students at Peking University have protested against. The party’s censors have wiped out the displeasure of the students, who are not allowed to leave their immediate living environment, from the Internet.
The new figures reflect only one aspect of the tragedy unfolding in the People’s Republic. Global supply chains were disrupted, the city’s port was unable to function properly, and hundreds of ships waited outside its gates to be cleared. In addition, according to Forbes magazine, there are over 61,000 foreign-invested companies in Shanghai alone. So the way Beijing is handling the omicron outbreak also has an immediate impact on investors from around the world. The European Chamber of Commerce in China has therefore already called for easing, but bite on granite in Beijing.
China’s ruler Xi Jinping said at a Politburo meeting that his approach to containing the pandemic, his zero-Covid strategy, is “scientific and efficient” and would stand “the test of history”. Xi went on to say that China would “violently oppose” anyone who doubted its Covid policies.
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Anthony Fauci, the top US pandemic fighter, was not impressed by this. “Just going into lockdown and waiting for the virus to go away isn’t going to work,” he said. The People’s Republic has failed to vaccinate the elderly sufficiently and to allow vaccines from abroad that are more effective against omicron. For ideological reasons, Xi, who has pursued an anti-Western course for years, does not want to import vaccines from the free world.
Meanwhile, exports are also collapsing and the tech industry is laying off thousands of workers. The unemployment rate in the People’s Republic is 6.1 percent, the highest since the peak of the first wave of the pandemic in spring 2020. The government had hoped to keep unemployment at 5.5 percent.
The cause of this crisis, which will not end with the lockdown in Shanghai, is an ideologically radicalized leadership that does not want to see the heart of the problems it is facing. For the systemic struggle between dictatorship and democracy, this may mean a point victory for the free world. While in China people remain locked up for weeks, life in Europe and the US is back.
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