According to the Liberty Times, strict pandemic prevention measures greatly benefited China’s economy in the first two years. China supposedly maintained a low infection rate when the pandemic plagued the world. This allowed the nation to maintain regular internal business.

International orders are pouring into China one after another, and exports will increase by more than 20% in 2021.

However, China’s zero-clearing policy has changed drastically. The country has been relying solely on excessive lockdowns and nucleic acid testing to curb the spread of the pandemic. It directly ruined China’s economic prospects.

The Omicron crushed China’s zero COVID policy

The Omicron variant, which has greater transmission power, has swept through China. As a result, it will damage China’s economy in 2022.

For instance, Shanghai announced the city’s lockdown without warning in March. The lockdown affected China’s semiconductor and electronic foundries. The spread of the variant impacted industrial supply chains such as electric vehicles and the production capacity of Tesla and Apple’s iPhone.

In January, in only one month of lockdown, Shanghai lost 27.7 billion yuan (almost $4 billion). Furthermore, the French media RFi cited some netizens’ calculations. The cost for nucleic acid testing was 5.5 billion yuan ($789 million), while isolation centers cost 6 billion yuan ($860 million).

Moreover, the situation in China this summer seems less optimistic than in previous years. The higher the rate of infections, the greater the impact on the economy.

The World Bank estimates the country’s real GDP growth to be less than 2.7% in 2022 as the pandemic has curbed economic activities.

Major cities feel the pain of the lockdowns

Following Shanghai in September, Chengdu province, a first-tier city that had just experienced power cuts and shutdowns, was also closed.

According to Technodes, Sichuan’s decision to cut power affects dozens of notable semiconductor, electronics, and downstream firms. Companies such as BOE, Foxconn, CATL, Texas Instruments, Apple, Tesla, and Nio have factories in Sichuan.

According to Bloomberg, the power cuts in Sichuan caused woes for manufacturers. Bloomberg cited researcher Mysteel’s survey, which found that Sichuan halted its entire aluminum capacity of 1 million tons due to power shortages.

China Electric Power Planning and Engineering Institute said more provinces would face power shortages due to a lag in capacity expansion and insufficient grid connection.

China successfully blocked the spread of the epidemic in the short term. However, the country was experiencing an economic recession and increased dissatisfaction. The incident at the Foxconn factory in Zhengzhou and the White Paper revolution are two examples.  

Increasing drug demand, lack of vaccines and more chaos

China is now dealing with a great wave of COVID infections as their new measures are more relaxed, adding more difficulties.

Reuters cited WHO spokesperson Margaret Harris in the latest press briefing. She believes China will face a very difficult time after completely exiting the zero-clearing policy.

According to the Liberty Times, the number of infections may continue to rise in the face of the upcoming New Year’s holiday and get worse. The 3 indicators are the lack of effective vaccines from the West, drug panic buying amid the surge in confirmed cases, and the straining of local medical capacity.

The outlook of China’s economy after exiting the Zero-COVID policy comes with many variables. Economists agree that it might take three months to half a year to restore normal life. It means China is still struggling to deal with economic difficulties.

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