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Chinese President Xi Jinping pledged to reduce the economic impact of his Covid-fighting measures, signaling a shift in a longstanding strategy that has minimized fatalities but weighed heavily on the world’s second-largest economy.
While reiterating a commitment to its Covid-Zero policy, China will “strive to achieve the maximum prevention and control effect at the least cost and minimize the impact of the epidemic on economic and social development,” Xi told a meeting late Thursday of the Politburo standing committee, the Communist Party’s top decision-making body.
It’s the first time that Xi has emphasized minimizing the economic cost of Covid-19 prevention at a Politburo meeting since the start of the pandemic in 2020, according to a Bloomberg search of the government’s website. China has been grappling with its worst virus outbreak since Wuhan, with tens of millions of people including residents of the southern tech hub of Shenzhen in lockdown.
As part of a vow to stabilize financial markets and stimulate the economy, China has said virus controls should be coordinated with economic development. The comments, made at a meeting this week of China’s top financial policy committee, reiterated what has been a regular drumbeat from officials the past month that Covid policy needed to be tweaked to minimize disruption for business.
China isn’t expected to ease up meaningfully on Covid Zero before 2023, given the need for stability in a politically important year for Xi, people familiar with China’s thinking have told Bloomberg News. The strategy has left the country’s borders effectively closed, with all travelers subject to mandatory quarantine and every virus case internally isolated, regardless of severity.
The signals from Xi’s meeting suggest China will “first eliminate infections, and then adjust its virus control strategies,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong Ltd. Phrases in the statement that China shouldn’t waver in fighting the virus imply “any adjustment will come with the pre-condition of eliminating infections,” he said.
Growth Target
Several economists, including from Morgan Stanley and UBS Group AG, have recently downgraded their economic growth forecasts for the year, saying Beijing’s target of about 5.5% expansion will be difficult to achieve. Goldman Sachs Group Inc.’s chief China economist Hui Shan and colleagues estimate a four-week lockdown of 30% of the country could reduce gross domestic product by around 1 percentage point.
The virus controls have led to temporary factory shutdowns at companies like iPhone maker Foxconn Technology Group and Toyota Motor Corp. For consumers, the restrictions have meant a slump in travel and spending at shops and restaurants, with sentiment still weak compared with pre-pandemic levels.
In another positive sign, the government said Friday the lockdown in Shenzhen would be partially eased, with factory operations resumed, along with buses and subways at five districts after they achieved their case-reduction targets.
Beijing also wants to see minimal disruption to people’s lives, with Xi saying China should “maintain the stability and order of the people’s normal production and life, do a good job in the production and supply of daily necessities, and ensure people’s medical needs.”
On vaccines, Xi called for a step-up in public education and promotion of their benefits and further improvement in vaccination rates. He also called for scientific and technological research and development of vaccines to be strengthened.
China has exclusively rolled out locally developed shots, which have been found to be less effective against Covid, and in particular against stopping transmission of the highly contagious omicron variant now fueling outbreaks.
Concerns about the vaccines, along with the capacity of China’s under-resourced hospital system, may be behind the reluctance to open up more broadly for some time. Covid Zero has left China isolated as the rest of the world dismantles border curbs and pandemic restrictions and looks to live alongside the virus.
Nomura Holdings Inc. said China’s focus on developing its home-grown vaccines, which remains uncertain, suggest it’s not ready to exit the Covid Zero strategy this year.
The comments from Xi are seen “neither as a sign of exiting the current ‘dynamic zero-Covid strategy’ yet, nor a sign of a road map of shifting to a living-with-Covid strategy,” Nomura’s chief China economist Lu Ting and colleagues wrote in a note, using China’s name for the policy.
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