How Xi’s Covid catastrophe put the global economy at risk
China has lost control and infections are surging – with unknown consequenceswww.telegraph.co.uk
How Xi’s Covid catastrophe put the global economy at risk
By Matt Oliver 24 December 2022 • 10:00am
12–16 minutes
China has lost control and infections are surging – with unknown consequences
Smoke billows round the clock from the chimneys of Beijing’s crematoriums, as hearses queue outside and body bags pile up in metal containers.
Elsewhere, the city’s hospital wards are overflowing with severely ill patients and pharmacies have sold out of cough medicines.
In state-controlled media, there is little sense of this unfolding catastrophe. But to experts around the world - and anyone with eyes of their own - it is clear China is gripped by a devastating new wave of the coronavirus.
After the sudden easing of President Xi Jinping’s “zero Covid” rules, the country is now on course for up to 280 million infections and at least 1 million deaths as the virus rips through the population, according to some predictive models.
In addition to the brutal human toll, the virus risks crippling the world's second largest economy just as it was attempting to reopen.
As ports shut down because of sickness, supply chains seize up and millions of consumers panic, the implications are dire - both for China and the West, which buys so many of its goods.
After a year in which a Russian invasion that few saw coming tipped the global economy into crisis, could China's Covid disaster prove to be the "black swan" moment of 2023?
Covid waves to hit China's factory hub
Chinese citizens would normally celebrate the lunar new year in January with firecrackers, dancing, temple fairs and flower markets, as well as one of the biggest middle class spending sprees on the planet.
But this year it will instead be a muted affair, says George Magnus, an economist and associate of Oxford University’s China Centre.
“People will be frightened to go out, they will not be comfortable spending money and they will not want to socialise,” he says.
“The lunar year is usually a high-spending period for China, much like Christmas for us, but now the economic picture domestically is looking nightmarish.”
There will be a serious impact on the rest of the world as well.
“You are going to see supply chains getting choked up, ports will become congested, they won’t export as much and people won’t turn up for work because they are sick - so for a while the situation will be pretty negative,” Magnus says.
“The question is how quickly the virus surges through the population - and if Beijing is anything to go by, it is happening very quickly.”
According to modelling by British data company Airfinity, the new Covid wave will initially prompt cases to surge in Beijing and the Guangdong province - the country's main manufacturing hub - before a second wave when the virus spreads to other regions.
This will mean that infections will peak at 3.7 million a day on January 13, eight days before the lunar new year celebrations. They will then fall, before rising again in spring to another peak at 4.2 million on March 3.
Airfinity says this will result in 5,000 deaths a day.
Leaked figures from inside the Chinese regime itself suggest the situation may already be far worse even than this.
‘How come people only die in Beijing?’
The numbers paint a starkly different picture to official published Chinese data, which claim fewer than 10 people have died from the coronavirus - all of them in Beijing - since Xi’s zero-Covid policies were effectively junked on December 8.
That dubious claim is not taken seriously by experts - or even Chinese citizens.
“How come people only die in Beijing? What about the rest of the country?” one person posted on social network Weibo.
Until the change earlier this month, China’s zero-Covid strategy had largely kept the virus under control for the past three years through draconian lockdowns and testing.
Entire cities including Shanghai were shut down for weeks to contain small outbreaks, with skyscrapers and apartment blocks repurposed as quarantine centres to house the infected and factories and businesses forced to temporarily close. In some cases, people were kicked out of the buildings they lived in after the sites were taken over by state authorities.
The result was far fewer deaths than many other countries, leading Xi to boast that China’s approach was only possible thanks to the Communist party-controlled system - a jibe aimed at Western rivals who had suffered higher numbers of fatalities.
Yet the hubris of Xi and his apparatchiks was built on what now look like serious mistakes, according to Paul Hunter, a professor of medicine at the University of East Anglia.
Early on in the pandemic, epidemiologists realised there was little chance of controlling the coronavirus forever - it was simply too transmissible - so many instead advocated restrictions to protect people until an effective vaccine could be developed.
Vaccines would not stop the virus from spreading but they could give the population better protection, drastically reducing the number of people who became severely ill and died. The UK Health Security Agency said in February that two doses of a Covid vaccine followed by a booster shot would prevent death in 95pc of infected over-50s.
In China, the government’s lockdown methods proved ruthlessly efficient at halting the spread of Covid and Beijing then rolled out home-grown vaccines, thumbing its nose at Western-developed shots.
But the jabs were prioritised for the young and economically active, with the government not even promoting them to the elderly until November 2021. What’s more, many elderly Chinese are sceptical of domestically made shots anyway following a string of scandals that have rocked faith in the country’s medicine and food regulators. Later it was reported only 40pc of over-80s received a booster.
Meanwhile, instead of easing restrictions once much of the population had been jabbed, Xi and the Chinese government stuck with their zero-Covid approach, vowing to eliminate the disease completely and taking a significantly different approach to Western countries which were beginning to open up again.
This meant Covid’s spread was initially checked but over subsequent months Chinese immunity faded, says Hunter.
All the while, anger and concern was building as videos spread on social networks of people being dragged from their homes and separated from their families under the strict regime, in contrast to other countries that were opening up and learning to live with Covid.
This anger boiled over in early December as citizens held unprecedented protests in seven Chinese cities, prompting a tense standoff with police wearing hazmat suits and a hasty decision by Xi’s government to change tack and rapidly lift restrictions.
The move has hastened the spread of a Covid wave that was already gaining momentum.
“To a large extent, what is happening in China now is inevitable,” adds Hunter. “The problem they have is that a lot of the benefit they gained from vaccines has now gone, even against severe disease.”
At the same time, China has not gained the advantage of “hybrid immunity” enjoyed by much of the UK, where people have caught the virus but not become seriously ill due to vaccines and boosters - and then retained antibodies.
Economic misery
“The Chinese population is almost as much at risk as it was a year ago, whereas for the rest of the world, the risk is a lot lower,” says Hunter.
He adds that the latest Covid wave was likely to have gained momentum anyway, but that it will now spread even faster.
In a sign of the chaos to come, almost 37 million people may have been infected on a single day this week, according to internal government estimates reported by Bloomberg on Friday.
The figures said some 248 million people - nearly one-fifth of the population - were likely to have contracted the virus in the first 20 days of December.
The result for the Chinese economy - and the world’s - will be yet more misery.
Activity in factories was already contracting last month as the number of cases surged, according to the National Bureau of Statistics.
The official manufacturing purchasing managers’ index (PMI) fell to 48 in November, the lowest reading since April. Anything below 50 means activity in manufacturing and services is contracting.
And there are now signs of disruption to the country’s supply chains and ports, threatening knock-on delays for businesses around the globe.
The Port of Shanghai - the world's biggest container port, covering the equivalent of 340,000 football pitches - has been isolating international goods to attempt to prevent disruption, but sickness is already said to be affecting operations.
Peter Lindström, head of research at Norwegian shipping company Torvald Klaveness, on Wednesday tweeted that 90pc of the Chinese agents used by his firm were unwell, including those in Beijing, Tianjin, Shanghai, Ningbo, Guangzhou and other cities.
He claimed the spread of Covid in China was “out of control”.
Shipyards are also expected to fall behind with construction of new vessels and repairs of existing ones due to workforce absences, maritime news website Splash reported on Friday.
In other parts of the country, land-based logistics networks are seizing up, cutting off the stream of vital components flowing into China’s many “factory cities” and forcing some to temporarily shut down.
Alice Tang, a transport planner at freight company ITS Cargo, said many factories had decided to start the new year holiday early, with some textile workshops in Zhejiang telling workers not to come back for two months.
One Chinese freight forwarder said more than half of their colleagues were off because of illness, she told industry publication the Loadstar.
Global impact
At the same time, similar problems have left courier companies understaffed - resulting in parcels “piling up in the streets of Beijing” and supermarkets “filled with plastic bags of goods” waiting to be delivered, Tang added.
Freight management company Zencargo has separately warned that truck drivers falling ill could bring “major disruption to supply chains”.
Like the number of infections and deaths from Covid in China, the knock-on effect this will have on the rest of the world remains uncertain. Delays at the country’s ports triggered by lockdowns earlier this year caused long delays for goods around the world.
But other countries are already expressing their concern, including the US. At a press conference on Thursday, Secretary of State Antony Blinken told journalists there were “clear implications for the global economy”.
“On all of those levels – a basic humanitarian level, the concern for everyone’s health, as well as for the global economy – it’s profoundly in our interest that China do what’s necessary to get ahead of this,” he said.
He said Washington, which is the largest donor of vaccines around the world, was prepared to support Beijing, before adding: “China has not asked for that help.”
Steve Tsang, an associate fellow and China expert at Chatham House, believes the chances of Xi accepting any form of help from the White House is zero.
To do so would be a tacit admission that China cannot handle the crisis itself - shattering the boastful narrative Xi has cultivated for the past two and a half years.
Tsang points out that even though the zero-Covid rules have in reality been disposed of, the Chinese government still maintains the policy is in force, just with adjustments.
And even though Western mRNA vaccines, unlike the Chinese jabs, have been adapted to be more effective against the omicron variant, Xi is unlikely to stoop to asking for them.
“Using Western vaccines would be an admission that China has messed up,” Tsang adds. “There is no way Xi will tolerate that.”
Instead he believes Beijing will hunker down and seek to limit the damage by pushing local authorities to vaccinate the elderly.
A blow to Xi
The economic malaise still likely to follow will compound what has been a rotten year for China, which is facing troubles on multiple fronts already, from a property crisis to falling demand for exports as the global economy slows down.
On Friday Ducan Wrigley, chief China economist at Pantheon Economics, predicted that the country won’t start to make significant progress reopening until the April-June quarter of 2023.
“China is not out of the woods yet,” he told clients.
Much of the debate is now focused on how long the latest Covid wave will last, Oxford University’s Magnus says.
“If the virus falls away as quickly as it has done elsewhere, perhaps by March or late spring, then you could see a situation where spending picks up again and the virus is just a bad memory,” he adds.
But the bleak situation is still likely to deal a blow to Xi’s personal authority. “The Chinese government are portrayed as being 50 chess moves ahead of everyone else," Magnus says.
"But I think this crisis has proved that the governance mechanism in China under Xi Jinping is deeply flawed.
“It’s just speculation, but a lot of very odd things have happened in Chinese politics recently and I wonder whether he is still in control as much as we all think.”
As hospitals and funeral parlours across the country struggle to cope and businesses grind to a halt, the human and economic price of Xi’s blunders are only just becoming clear.
Overall it's 90%, but the problem is a lot of people haven't received any booster for close to a year.
Xi had some initial success with Zero COVID and decided to claim credit for that. To change course would make him look weak and silly, especially when he was going for a 3rd term. Instead of following the scientists and doctors, he took the country on a stupid ride that ruined the economy and the stability of his own rule.
thats good news. sick n tired of this corona virus.
New Recruit
This is for Omicron. And Chinese government planned to reopen in March and based on statistics from the previous 6 months since the March 2022 Shanghai outbreak, we know the death rates are low and Chinese vaccines work.
