MNI INTERVIEW: China's Targeted Zero-Covid Gives Econ Headroom

China has tweaked its zero-Covid policy to a targeted effort that should limit the economic impact, though this may not be enough to fully normalise production capacity and could pressure exports as other economies recover at a faster pace, Qiu Xiaohua, former director of the National Bureau of Statistics told MNI.

Qiu, now chief economist of Jufeng Investment Information, said one key threat to exports is greater competitive pressures as other countries could return to pre-pandemic production levels later this year.

“The epidemic still takes a bite of about 2% from GDP,” said Qiu, speaking from the perspective of retail sales which is supposed to grow about 8% in a virus-free condition but only recorded a 3.9% gain when averaging 2020-2021.

NEW ROUND

China is fighting against a new round of Omicron variants with Tianjin, a port city close to Beijing ordered into a partial lockdown. As well a few other cities in populated and developed provinces reported local Omicron cases, just ahead of the upcoming Beijing Winter Olympics and the Spring Festival in February.

The strict zero-Covid policy, has drawn some criticism that this could prolong global supply chain disruption, as authorities can shut down important ports and factories.

But Qiu, pointed out that the strict anti-epidemic measures have become more targeted, usually labeling specific areas as medium or high risks. And there is higher tolerance for easier measures in economically developed regions with a higher-level of governance capacity, he added.

CONSUMPTION PICKING UP

“The toughest time has passed, and vaccines are racing against the virus with a narrowing gap,” said Qiu.

Exports, though maintaining an over 20% growth rate, may slow even as shipments show some resilience and contribute about 10% to the overall growth rate this year, about half of the 2021 level, he said.

With the epidemic expected to ease, consumption is likely to grow about 6% in 2022, and lift its contribution to GDP to about 70% from 65.4% in 2021, Qiu added.