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Zero COVID-19 Policy Limits the Growth of China’s Economy

Política de cero covid-19

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The zero COVID-19 policy is affecting China’s growth prospects so dizzyingly, that some economists have even resorted to the word “recession” to refer to the future of the world’s second-largest economy.

Strictly speaking, a recession refers to two continuous periods of economic contraction, so China would not technically be in one, and its government has the ability to expand public spending in ways that Western democracies could not, so an economic slowdown in the Asian giant remains to be seen.

However, the continuing quarantines are taking their toll on the Chinese economy, many young students are unable to find stable employment, business confidence has fallen, and imports have dropped precipitously.

According to official figures, youth unemployment affects 16% of this population, and the number of people employed in small and medium-sized businesses has fallen by 30%, showing the weakening of some sectors of the economy in the Asian country.

Many young people in China are having trouble finding work. (Image: EFE)

China’s production is constrained by the zero COVID-19 policy

China’s manufacturing production numbers show that for the second consecutive month they have fallen, marking their lowest point since the start of the pandemic in 2020. In some cities such as Shanghai, where the zero COVID-19 policy has been more stringent, industrial production has fallen even more precipitously.

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Some provinces concerned about the severity of the quarantines in Shanghai have begun localized quarantines or limiting the movement of their citizens to prevent an outbreak of new COVID-19 cases in their prefectures.

The zero COVID-19 policy is also causing real logistical headaches in the country. Entire fleets of trucks have been stopped until the authorities make sure their drivers are free of COVID-19 symptoms.

As a result, factories that have been able to operate despite COVID-19 have had to stop production anyway as shortages of materials fail to arrive due to bottlenecks in the supply chains themselves.

Covid-19
The zero covid-19 policy has severely affected mobility and consequently the consumption and transportation of supplies throughout China. (Image: EFE)

Although Chinese officials maintain the goal that the economy will grow by 5.5% during 2022, the goal is looking increasingly fuzzy with the implementation of zero-tolerance COVID-19 policies.

Any slowdown in China’s growth will be felt globally, as it would deprive the world of a cheap source of consumer goods, at a time when governments are struggling to control rampant inflation and the war in Ukraine is limiting the supply of commodities such as wheat, oil, gas, and steel.

Key industries such as semiconductor manufacturing, or microchips, have been affected by ongoing quarantines. For the first time since 2019, semiconductor production in China has fallen by 4.9 %.

Semiconductor factories, several of which are located in Shanghai, have had to deal not only with quarantines but also with the various traffic controls that affect the arrival of components to manufacture the precious microchips necessary for the operation of any electronic device today.

Although China’s growth continues to be relatively high compared to other emerging economies, the International Monetary Fund has already cut the Asian giant’s growth prospects to 4.4%.

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