Array
It would be a gross understatement to say China is ill-prepared for President Xi Jinping’s recent abrupt abandonment of his zero-COVID policy. With a large part of the population inadequately vaccinated, COVID is spreading like wildfire across the country. More than half the passengers on a China-to-Italy flight this week tested positive.
Leaked notes from Chinese official estimates reveal that over the past 20 days as many as 250 million people might have been infected with the virus. It’s now leading to widespread workplace absenteeism and a sharp drop in consumer and investor confidence in the economy.
There’s never a good time for COVID chaos to strike China, the world’s second-largest economy and until recently the world’s main engine of economic growth. But it’s a particularly bad time for such a shock.
China’s economy was already in a weakened state thanks to the zero-COVID policy and the bursting of its outsized property and credit-market bubble. Chinese economic growth for 2022 is likely to have been only some 2.75% — half the government’s 5.5% growth target — per the World Bank.
Beijing’s new economic shock is coming when the rest of the world economy is headed to recession as its central banks slam on the monetary-policy brakes to regain control over multi-decade-high inflation.
With the virus widely expected to spread exponentially at the end of January as Chinese workers head home to celebrate the lunar New Year, expect a strong Chinese policy response to prevent the economy from a major slump.
