China has seen a resurgence of Covid-19 cases through 2022, and is facing its most strict test to date of its “zero Covid” policies. In response authorities have ordered strict lockdown measures as they attempt to contain the virus, but has it been worth it?
Firstly, there is the human impact. Sweeping measures that have been varied from day to day have introduced high levels of stress into the daily lives of millions. Each morning families wake up unsure if they will be able to shop for food that day, or whether they will be allowed out of their homes at all.
Reports are emerging from China that indicate the start of a mental health crisis as a result of the harsh regulations imposed by authorities. There is no point of protecting the nation’s physical health if it is to the detriment of mental health.
Then there’s the economic fallout. The IMF warned last week that the impact of lockdown measures on production and supply lines posed risks to the global economy, cutting its growth projection for China to 4.4%.
The effects of China’s draconian measures are felt beyond the nation’s borders. Scott Jones of WNC Equity Advisors warned last year that US markets remained vulnerable not only to new restrictions at home but also abroad, and the Chinese slowdown is showing just how reliant US industry is on international supply lines.
The US is particularly dependent on China for imports of electronic and industrial equipment, and several firms have complained about not being able to receive essential supplies from the country. Several companies have voiced fears that they may have to reduce their own production targets if restrictions are not eased soon.
Chinese authorities remain defiant in spite of the chaos caused by the measures imposed. Communist party officials have stuck to the “zero Covid” mantra passed down from Beijing, whilst president Xi Jinping has said that China’s economy is ready to weather the storm caused by the outbreaks in major cities. The Chinese central bank has so far refused to downgrade economic forecasts for the country.