China’s zero-Covid policy under renewed scrutiny as economic challenges mount

While the strict disease prevention strategy proved a success early in the pandemic, economic risks are growing and so is public dissatisfaction

The policy will further weigh on consumption and economic growth, and may prove ineffective in containing a more transmissible virus variant, economists say

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China is currently confronting a new wave of sporadic outbreaks in addition to the looming threat of Omicron. Photo: Reuters

Published: 6:00am, 7 Jan 2022Updated: 12:29pm, 7 Jan 2022

China’s zero-tolerance approach to the coronavirus pandemic has become the subject of renewed debate by economists, who say the cost to the economy is becoming increasingly unbearable.

While the strict disease prevention strategy proved a success early in the pandemic, a more transmissible variant in Omicron, the rising costs of lockdowns, soft domestic consumption, a deteriorating fiscal situation and increasing dissatisfaction among its population are causing diminishing benefits for China, economists said.

“It is necessary to take a forward-looking approach,” said Chen Xingdong, chief China economist at the BNP Paribas. “China cannot simply continue with whatever the policy is being implemented.”

China is currently confronting a new wave of sporadic outbreaks in addition to the looming threat of Omicron, with the city of Xian in northern Shaanxi province becoming the nation’s new pandemic epicentre.

We do expect the zero-Covid policy to ease, but we do not know what the easing measures are going to be and when they will take place

Chen Xingdong

Under the government’s zero-tolerance policy, the whole city has been locked down since December 23, with heavy restrictions on people leaving their homes. Local officials have been criticised for mishandling the lockdown, with residents complaining about food shortages and limited access to medical resources.

“We must learn a lesson from Xian,” Chen said at the 2022 China economic outlook webinar hosted by BNP Paribas on Thursday. “It doesn’t seem that all the local governments are able to implement the policy ideally, so I think the central government has become more realistic.”

“It seems the central government has realised the cost of the zero-Covid policy – it is definitely very dear and it’s hard to continue.”