China’s economic data hints at the cost of the Zero Covid strategy

BEIJING – Faced with its worst Covid-19 epidemic to date, China is imposing an increasing number of mass quarantines, strict blockades and border controls. The measures may work, but official figures released on Monday show they are making dire sacrifices in the world’s second-largest economy.

China’s economy grew by 4.8% in the first three months of this year compared to the same period last year. This pace was only faster than the last three months of last year, and also hid an emerging problem.

Much of this growth was registered in January and February. Economic activity slowed last month as Shenzhen, the technology hub to the south, and then Shanghai, the country’s largest city, and other important industrial centers were closed. Blockages stopped production lines, grounded workers, caught truck drivers and snarled at ports. They have limited hundreds of millions of home users.

Retail sales, a crucial sign of whether consumers are spending, fell 3.5 percent in March from a year ago, the National Bureau of Statistics said Monday. Factory production rose 5 percent, a pace slower than the first two months. Imports, which were moving forward in the first two months of the year, fell slightly last month, partly due to transport difficulties.

The slowdown, which began in March, is expected to worsen this month, with more regions under restrictions. This is bad news for Chinese leaders, who have set a goal of “about 5.5 percentage ” growth for the year.

Premier Li Keqiang called for a “sense of urgency” a week ago, telling local authorities to limit the effects of stopping Covid on the economy. China’s central bank acted on Friday to help commercial banks lend more to boost economic growth.

For the world, stopping Covid in China could fuel inflation by further disrupting the supply chains that many manufacturers rely on, increasing the cost of producing and transporting goods. Slow China would also import less than other nations, whether it’s natural resources such as oil and iron ore or consumer goods such as cherries or designer bags.

“Speaking of the pandemic impact on Shanghai and Shenzhen, we must not forget that they are important parts of the entire supply chain and will certainly have an impact on the entire Chinese economy,” said Yao Jingyuan, a former chief economist at the National Statistics Office. bureau, which is now a cabinet adviser, told a news conference last Wednesday.

Leaders in the automotive and technology industries, two of China’s largest employers, have begun warning in recent days of crippling disruptions to their national operations if Shanghai, in particular, cannot reopen soon. The city produces many high-tech components that are crucial to many supply chains.

“Shanghai is a hub for international car companies – if the hub breaks down, the whole system will not work,” said Cui Dongshu, secretary general of the China Automobile Association, in a telephone interview.

By April 11, 87 of China’s 100 largest cities had imposed some form of traffic restriction, according to Gavekal Dragonomics, an independent economic research firm monitoring the blockade. They range from restricting who can enter or leave the city to a complete blockade, as in Shanghai, where most residents are not allowed to leave their homes or even buy food.

Yang Degang, the manager of a factory that makes plastic molding machines in Zhangjiagang, 70 miles from Shanghai, was forced to suspend operations after the city imposed a blockade on Wednesday.

Even before the blockade, authorities imposed restrictions that prevented trucks from moving. This meant that Mr. Young could not receive components in time to build his machines and could not deliver finished equipment to many factories and ports in blocked conditions.

Mr Young said he did not know when he could reopen. “Zhangjiagang is under a lot of pressure,” he said. “I’m worried about losing, but there’s no other way.”

But as more and more cities impose blockades – Taiyuan, the center of China’s coal industry, joined the list last Thursday – the severity of municipal blockades has eased somewhat recently. From the end of March to last Wednesday, the number of major cities with heavy blockades fell to six from 14, according to Gavekal. The share of Chinese economic output represented by these cities has shrunk to 8 percent from 14 percent.

Beijing has ordered local authorities to help the trucks reach their destination and take other measures to protect the economy from damage during the blockade. Nio, an electric car maker in Hefei in central China, stopped assembling cars on April 9th. Hefei was not blocked, but suppliers of important components were in Shanghai, Jilin and elsewhere. By last Thursday, however, the company had received enough car parts to resume limited production.

Many workers are also struggling. Truck drivers, for example, face the constant danger of weekly quarantine, for which they are often not paid, even when interest payments on their trucks continue to fall.

Yu Yao, a truck driver who delivers vegetables and fruits from Shandong Province to Shanghai, is one of many Chinese truck drivers blocked due to ever-tightening measures to control the epidemic. He has been trapped in Shanghai for more than three weeks.

Mr. Yu came to Shanghai on March 16 to deliver vegetables to the market. He was still in town three days later when authorities identified him as a close contact of an infected person in the market. Police ordered his immediate quarantine. So he stopped his truck near the highway and waited.

He’s been waiting ever since. No one took him to quarantine. He lacks a travel permit, which is now required to drive a truck in Shanghai during the blockade. He and four other unlicensed drivers slept on the ground and shared bread for three weeks.

“We can’t get off the highway, every exit is guarded. We just want to go home, “said Mr Yu.” I couldn’t get enough food the other day and my body can’t take it anymore. “

One area of ​​the Chinese economy continued to grow in the first three months of this year: exports. Chinese factories grabbed a significantly larger share of world markets during the pandemic, including a 14.7 percent jump in exports in March from a year earlier. Many multinational companies continue to depend on large networks of component suppliers in China.

But as China continues to disrupt production by imposing strict blockades without warning, at least a few Western importers are looking elsewhere for supplies. Jake Phipps, founder of Phipps & Company, an American importer and distributor of home furnishings that sells to hotel and apartment developers, said he has transferred many orders from China in the past two years.

He started buying kitchen cabinets from Vietnam and Turkey, vinyl flooring from Vietnam and India and stainless steel sinks from Malaysia. Repeated blockades in China have delayed too many shipments, including a blockade in a part of Ningbo near Shanghai that delayed its supply of plumbing supplies last month. Many customers are now wary of relying on China over tariffs, geopolitical tensions and questions about China’s possible role in the origin of the coronavirus, he added.

“Reliability has made me move, and the comfort of customers who do not want to order from China,” said Mr. Phipps.

Do you contributed to research.

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