China is trying to revive its post-Covid economy: but the rebound may not be immediate
The main reason for China’s rapid reopening and its dismantling of draconian anti-Covid restrictions is the Chinese Communist Party’s desire to restart the economy as soon as possible. The data for 2022 will show a slowdown and in all probability the growth target set at +5.5% will not be reached or even touched. A rebound is expected in 2023 but in an economy still very much driven by exports there are several obstacles between demand and inflation. Not to mention the high youth unemployment which also represents a potential risk at a political level.
Europe is observing carefully, also because the Chinese market represents a fundamental outlet for exports. Italy itself, as highlighted by the bilateral agreement between Giorgia Meloni and Xi Jinping on the sidelines of the G20 in Bali, aims to increase trade cooperation with Beijing despite differences in political and diplomatic positions. But now the Covid chaos with the introduction of new checks for so many Chinese upon arrival threatens détente.
Let’s start with the health situation, which seems to suggest a not so distant economic recovery. According to several testimonies arriving from China, the streets of large cities are being repopulated after the initial desert following the government’s sudden decision to dismantle the anti-Covid restrictions. As Bloomberg also reports, nearly a dozen major Chinese cities are seeing a resurgence in subway use, a sign that the surge in Covid infections may have peaked in some urban areas.
The trend of Covid in Italy
More and more people are taking the subway in 11 of China’s largest cities, with Shanghai, Guangzhou, Shenzhen and Nanjing among the latest major cities to report an upswing in travel over the past week. This comes after places like Beijing, Zhengzhou and Chongqing had already seen subway usage and traffic congestion increase after a low reached in mid-December.
This, clearly, at a high price especially in terms of pressure on the hospital system and after an exponential increase in infections. According to Chen Erzhen, vice president of Ruijin Hospital and member of the Shanghai Covid-19 Expert Advisory Group, around 70% of Shanghai’s population may have already been infected with Covid-19 after last month’s sudden turnaround. Chen declared it to the People’s Daily, which is to say the reference organ of the Communist Party of China.
As another Chinese media outlet acknowledges, Sixth Tone, Beijing, Shanghai and other major cities are already experiencing drug shortages and limited hospital resources due to the spike in cases. But perhaps the greatest challenge is represented by the vast rural areas of China, where the elderly represent a growing percentage of the population and where medical resources are scarce. This challenge will likely worsen as millions of immigrants return to their hometowns for the Lunar New Year on January 22.
Also for this reason it is difficult to expect a complete and rapid recovery of the Chinese economy. Even if some positive signs arrive, such as for example the return to almost full production of the mega Foxconn plant in Zhengzhouwhich had been affected by long lockdowns due to waves of contagion and the mass flight of employees, as well as their November protests.
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