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The human and economic cost of China’s zero Covid strategy is mounting

Zhang Weiya bears the emotional scars of China’s “zero-covid strategy”. The mother of a four-year-old son recently came out of more than 50 days locked in her Shanghai apartment with her husband, mother-in-law and a barking family dog.

She was ecstatic as she breathed fresh air late last month when China’s largest city lifted a forced confinement that at one time or another affected most of its 25 million residents. But on Thursday, she heard the news that authorities will once again shut down a district of 2.7 million people to conduct massive coronavirus tests.

“My arms are literally shaking,” she said. “It’s not our neighborhood that’s going to be locked, but it’s not far away. I really don’t know if my mental health could withstand another isolation. I even found myself getting mad at our beloved son for not wanting to remain silent for a minute.”

Her experience reveals one aspect of the human cost of China’s “techno-authoritarian” approach to fighting the pandemic. But the hardships are not limited to those in prison. A new phase in ‘zero-covid’ policy combines mass mobilization tactics borrowed from China’s revolutionary past with 21st-century technology used to track and bring people together in the intimate detail of their daily lives.

Every resident of most of China’s largest cities is required to have a medical report on their cell phone showing when they were last tested for Covid. If more than three days have passed, they may be denied access to public spaces and shops to buy daily necessities. Hundreds of thousands of Covid test booths are being built in many cities across the country to ensure that no resident is more than a 15-minute walk from an available test. Beijing’s intent is to stay ahead of the virus by picking up people who have tested positive before they’ve had a chance to spread it to others.

This, in turn, aims to free the government from the need to impose lengthy, citywide lockdowns that hammer the economy and stir huge public resentment. The lockdown announced Thursday in Shanghai’s Minhang district was therefore not intended to be long-lasting, authorities said.

However, for some Chinese, all this amounts to yet another repetition of digital dystopia by a government that has vowed to contain the spread of Covid at almost any cost. “This is so much nonsense. When will it end?” asked a bar owner in Beijing.[The government] ruin us to save face. What a bunch of posers! Why don’t they just cancel the controls?”

Small, mostly private, businesses have been hardest hit as China’s economic growth slumped this year with the spread of the Omicron variant and the lockdowns it caused. An online survey of 16,500 small and medium-sized businesses published by Peking University, Ant Group and MYBank found that 40 percent did not have enough money left to last another month.

In a very real sense, the bar owner’s tests are also those of the global economy. Whether the new “dynamic testing” approach proves successful will have a major impact on economic growth. China has long been the largest engine of global wealth, contributing 28 percent of global GDP growth from 2013 to 2018 — more than double the US’s share, according to an IMF survey.

The World Bank this week cited lockdowns in China, along with the war in Ukraine and supply chain disruptions, as one of the factors behind lowering its forecast for global GDP growth this year to 2.9 percent, from an actual 5 .7 percent for 2021.

Several economists say China could flirt with a rare GDP recession in the second quarter of this year, raising some hopes it could launch a “big bazooka” stimulus package to salvage its own weak performance and, by to do so, to give some momentum to the global economy.

But is this really likely? “Probably not,” said May Yan, director of UBS, a Hong Kong investment bank. “I don’t think China can give a big boost, even for its own good, let alone save the rest of the world.”

For starters, the major structural drivers of China’s growth over the past two decades are now nearly exhausted. The local governments that fueled the world’s biggest infrastructure boom are drowning in debt, much of which they hide from their central government superiors.

Goldman Sachs last year estimated that the total debt of local government financing vehicles, the thousands of poorly regulated funds of local authorities, was about Rmb 53 trillion (US$8.2 trillion) – more than twice the size of the German economy.

Financing this will be a serious challenge. A crucial source of funding – land sales to property developers – is drying up as China now has enough vacant apartments to house an estimated 90 million people.

China’s track record of largely keeping Covid under control since the initial outbreak in Wuhan has allowed it to maintain an overall balance. But the spread of Omicron now carries deep human and economic costs that show little sign of abating.

Additional reporting by Nian Liu

james.kynge@ft.com

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