Days after the northern Chinese city of Shijiazhuang reopened from a Covid-19 lockdown, barista Lu Mengyuan donned her apron, applied her eye glitter and was once again preparing coffee and hot Chinese pancakes for the trickle of residents slowly emerging from their homes. houses ventured.
Like many others, Lu believed the abrupt reopening of the city in the midst of a Covid wave and the vow to abolish mass testing marked a turning point. “We are the first in China, an experiment,” she said last Wednesday. “We’re not closing back.”
This week, however, Lu was once again in isolation and closed her silver Airstream coffee truck, as authorities responded to a near-record number of new Covid cases spreading across the country by re-locking down. “I really have egg on my face,” she said.
Analysts and investors had hoped that a series of more moderate Covid control measures announced by China’s cabinet on November 11 would mark the start of a shift towards living with the virus.
Instead, looser policies and confusing signals from Beijing have fueled a growing Covid outbreak, with new cases hitting nearly 30,000 new cases a day. Parts of the population have been locked down again in an effort to reduce transmission.
“Some local governments were confused, but the central government has now sent out the signal: China is not giving up on containment anytime soon,” said Ernan Cui, an analyst at research group Gavekal.
“Tightening Covid controls in outbreak areas seems to be their only option. The economy may come under more pressure as the government buys time to prepare for living with Covid.”
Life has slowed down in the Chinese capital, with the largest district, Chaoyang, largely closed. Residents of the southwestern metropolis of Chongqing are confined to their homes as an outbreak rages in Zhengzhou at a massive factory spewing out Apple iPhones. Lockdowns in Guangzhou’s southern manufacturing center have also been extended.
“The costs are getting more and more intolerable. It’s frustrating,” said William, a taxi driver trapped in Guangzhou’s Haizhu district. He added that the area’s initial three-day lockdown had already been extended four times.
The impact of China’s recurring Covid outbreaks and lockdowns is not limited to borders. Declining demand has slumped sales for global companies like Nike, kept oil prices in check and battered global supply chains.
Goldman Sachs forecasts gross domestic product will grow 3 percent this year and 4.5 percent in 2023. China’s official target is 5.5 percent growth this year. Any reopening would likely be “messy and bumpy” in the early stages, Goldman said.
The latest zero-Covid policy swing had a major impact on Shijiazhuang, which swung from empty to bustling to empty again in nine days. Last week’s decision to abolish and reopen mass testing put the city on track to start living with Covid.
“We wanted to do what people asked for. We wanted to open up, but then we did and everyone was scared,” said an official from the city’s center for disease control and prevention. “The changes have happened quickly. We have completely confused the residents.”
The official added: “The government faces a dilemma. The Chinese economy has become what it is today. It is not good . . . [but] if we open up completely, hospitals will be inundated not only with Covid cases but also with the other underlying disease it brings out. It takes a lot of medical resources. We will be overwhelmed.”
Analysts said China needed to increase vaccinations for the elderly and prepare its healthcare system to minimize deaths with each reopening. Only 66 percent of people over 80 have received two Covid shots.
Shijiazhuang is the provincial capital of Hebei and also one of the poorest cities in China with a population of 11 million. Covid lockdowns in September and again in early November had already taken their toll on businesses, a phone shop owner said. “Many didn’t make it,” he said.
City budget documents blame falling land sales and rising spending on essentials like pandemic prevention for the 25 percent year-over-year drop in income and the 29 percent increase in spending. It has left an “unprecedented gap between revenues and expenditures,” the city’s deputy finance chief Zhou Qiao’e warned in August.
Local governments across the country are facing similar challenges with lockdowns and a collapsing real estate market weighing on revenues, while spending on Covid testing and prevention is soaring. Economists at Nomura estimate that 412 million Chinese residents are facing some sort of pandemic restriction or lockdown.
“The leadership agrees that they should avoid Shanghai-style lockdowns, but the problem is what kind of balance [between containment and opening] they can achieve,” said Nomura chief economist China Ting Lu, referring to the financial center’s two-month lockdown this year.
“In the short term, they can strike a new balance which could still be quite restrictive given the rising Covid cases.”
Ambulance driver Xue Zhikun was thrown into the middle of Shijiazhuang’s policy debate last week. Demand for his services to haul potential Covid cases to the city’s quarantine hotels fell. “I only brought in six people this morning,” he said last Wednesday as he stripped off his gas mask and white protective suit outside a quarantine hotel.
Things picked up for Xue this week after the government restarted mass testing — until he tested positive himself. In his protective gear, Xue drove his ambulance to the most luxurious quarantine hotel he knew to check himself in. “I have a fever and a headache,” he said. “The virus gets through all the holes.”
Gavekal’s Cui pointed to the magnitude of the latest outbreak, saying the “chances of Covid containment failure are now greater than ever”.
Additional reporting by Nian Liu in Beijing