Will China's Covid crisis negatively impact its economic recovery plan?

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Beijing: China is facing a difficult decision between prioritizing economic recovery or controlling the spread of Covid-19. The country is currently experiencing a rapid increase in Covid cases, with predictions of more than one million Covid-related deaths in the coming days. At the same time, businesses are suffering losses and shutting down, leading to a forecast of the lowest economic growth in five decades at 2.8-3.2% this year. The Chinese government has warned of three successive waves of Covid infections until March 2023, leading to overcrowding at hospitals and crematoriums and disruptions in emergency and crematorium services.

Zero Covid policy

The failure of the "Zero Covid" policy, which has resulted in strict restrictions and a negative impact on the economy and employment, has caused protests in various cities and calls for the overthrow of the communist regime. The government must weigh the risks to the economy and people's livelihoods against the dangers to public health. It is a difficult situation as addressing one issue can worsen the other. Some companies, affected by the drop in orders, have laid off workers to lower costs, leading to an unemployment rate of 5.7%, with a higher rate of 17.1% for young people aged 16 to 24.

China's economic woes amid Covid crisis

The retail sales have fallen by 5.9% in November year-on-year, and there have been declines in property investment and industrial output and fixed asset investment. Major international companies, including Apple and Renesas Electronics, have suspended their operations in China. The government has relaxed some restrictions following the protests, but the warnings of new waves of Covid have created a Catch-22 situation.

(With ANI inputs)