Insight & Analysis

China wields double-edged sword with Covid

Published: Jan 2023

On one hand, China’s unwinding of its strict zero-Covid policy puts the country on a path to economic recovery. And on the other, it could also be headed for a public-health crisis, and international disputes, as a new wave of infections may spiral out of control.

Samurai sword display

China has officially entered a ‘new phase’ with its handling of Covid, according to state media, but this could mean it is responding with a double-edged sword that both helps and hinders the country.

China has unwound its unpopular harsh zero-Covid policy, which had triggered protests and dampened its economic growth. The era of travel restrictions, lockdowns and mass testing has come to an end and Chinese people are now free to travel abroad ahead of the upcoming Lunar New Year holiday. This is expected to provide a boost to the domestic economy, but at the same time a new outbreak of Covid may spin out of control amid accusations China is under-reporting the number of cases.

Unlike other countries around the world, which have pursued a strategy of herd immunity – through infections and vaccinations – China’s pursuit of zero Covid has many wondering if it was misguided. The strategy at first seemed to have worked when the country was the first to bounce back from the early stages of the pandemic. Now, after subsequent waves of Covid, China’s lockdowns have left its economy bruised and its population with a low level of immunity.

It is unclear whether Covid infections are under control in China, but many are concerned. The World Health Organisation (WHO) has questioned China’s official reporting of the figures. And the European Centre for Disease Prevention reported cases peaked in early December but have since fallen – although this is because fewer tests are now being done and China is no longer reporting asymptomatic cases. Meanwhile, there have been news reports of undertakers being overwhelmed by the number of deaths. And in one province, a public health official in a press conference stated that 89% of the people in Henan were infected. With a population of nearly 100 million, this means approximately 88 million people have been infected in one province alone.

With such staggering levels of Covid on the loose, it’s possible that hopes of economic recovery will be dashed as people will choose to stay home anyway. And for those who are travelling internationally, they are being faced with further restrictions. Many countries – including Japan, South Korea, France and the United States – are concerned about the influx of Chinese tourists amid this Covid outbreak. Various countries have imposed restrictions on travellers, which have been deemed ‘discriminatory’ by China, and have been met with reciprocal action.

Meanwhile, the opening up of China’s borders is a step towards economic recovery. Jane Sun, the CEO of Trip.com, told CNN that many people are interested in taking their family on vacation after three years of lockdown. “We expect for the first one or two quarters [of 2023], it will take airlines and hotels some time to rehire their staff and build up the infrastructure. During the second half of this year, hopefully the infrastructure will be back to normal,” she was quoted as saying. This is a much-needed move for the travel industry. In a previous interview with Treasury Today Group, Xuelin Chen, Director of Group Treasury at Trip.com Group, discussed the unique challenges she had to deal with during the pandemic.

And for online businesses that have benefitted from the lockdowns, such as e-commerce platform JD.com, the outlook is not gloomy. Seeking Alpha,a crowd-sourced content service for financial markets, for example, remains bullish on the company’s prospects and expects it to benefit from continued demand as China unwinds its zero-Covid restrictions.

Others are also optimistic about the prospects of economic recovery. The president of the Beijing-based American Chamber of Commerce, Michael Hart, told Forbes that “Most of our member companies are pretty optimistic that the Covid impact itself will be pretty short lived – one to three months and it’ll be over. Everybody’s pleased that flights will be opened up, and the quarantine is over,” he said.

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