Aside from deterring a few tourists, and people filming fantasy epics, closing down New Zealand during the Covid pandemic didn’t make much difference to the global economy. Neither, come to think of it, did Mark Drakeford’s determination to keep Wales free from Covid-19, and even Australia’s dedication to closing itself down didn’t matter that much as long as the mines stayed open. For most of the last two years ‘zero Covid’ policies have mainly affected the people unfortunate enough to live under them and those trapped from returning home.
But China? That is something different. And right now Beijing’s almost certainly doomed attempt to crush the virus is as much of a threat to the global economy as the war in Ukraine.
With strict lockdown, tracking and tracing, and lots of propaganda, China just about managed to keep Covid-19 under control as it raged through the rest of the world. But the Omicron variant has eluded even its tight controls. This week, it has been forced to put the city of Shenzhen into a strict lockdown. Shanghai has had to introduce restrictions, while the northern industrial hub of Changchun was locked down last week. This is hardly a minor matter.
Shenzhen matters, not just to China, but to the global economy as well. A city of 17.5 million people bordering Hong Kong, it is not just one of the biggest and wealthiest urban hubs in the country, it the country’s major centre for hi-tech manufacturing, as well as the base for many of China’s most global companies, including Huawei and Tencent, and a crucial port for shipping Chinese goods around the world. If you glance around your home or office, it is almost certain that lots of the stuff contains parts that came from Shenzhen. Shanghai, home to 26 million people, matters even more. As city after city locks down, the impact of that will be felt around the world.
In reality, China’s dedication to zero Covid is now a threat to the entire global economy. Supply chains that were already stretched to breaking point will come under even more strain as crucial components get held up. Inflation rates, that were already set to rise even higher as Russia’s invasion of Ukraine drives up commodity prices, will spiral. Stock markets are already falling as production and profits are set to evaporate, and growth that was already uncertain will be downgraded. Worst of all, it now seems entirely pointless. As Britain, the US, and most of Europe has demonstrated, with vaccines – preferably not the Chinese variety – Covid can be tamed to the point where it is not much more dangerous than the flu.
At some point, China’s leaders will be forced to abandon zero Covid. The Omicron variant is simply too infectious to be contained. And yet, the U-turn isn’t going to happen before a series of futile lockdowns force it to change course – and the rest of the global economy has taken yet another hit.
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