NO flexibility can be expected in Beijing’s ‘dynamic zero’ Covid policy, despite evidence that a hard line will have a devastating effect on the economy, reports Hong Kong’s China Economic Review.
‘Companies are looking to move production away from Shanghai and East China. This situation has unfolded in a way which sends a clear message about how a centralised non-transparent system can change things at any time, with no warning or recourse,’ said CER’s weekly online ial.
‘Companies don’t like to get caught in this kind of a vise and many will be looking to ensure they are protected from a recurrence. China is of course still a massive market with huge longer term potential particularly in terms of consumer markets, but the consequences of the nature of the system have never been clearer,’ said the ial.
The core reasons given for the rigidity are a low vaccination rate among older people nationwide and inadequate medical facilities in much of the country, said the publication’s weekly online ial. ‘China’s low vaccination rate amongst old people is perplexing given the nature of the system. How is it not possible for such a system to ensure that everyone has a jab in the arm?
‘The first economic numbers for April show, as expected, a dramatic downturn in many key indicators, and the impact will further drag on through May, June, who knows how long. It is going to be hugely damaging,’ the ial continued.
‘Chinese society is overall well able to withstand such shocks, due to high savings rates and the psychology of being prepared for any eventuality, but nobody in Shanghai and elsewhere could have expected the kind of situation that China is now facing. Also worth noting is the increasing impact all this is having in the world, which leads us to the topic of supply chains.
‘The implications are massive. So it has never been more important to read carefully the pronouncements from the Centre and to understand as clearly as possible what their intentions are and what the implications of that might be.
‘We are heading towards the 20th Congress, which is scheduled for ‘the second half of 2022.’ It is usually predicted that October will be the month, but who knows? maybe it will be fast-tracked. The more complex the situation, the trickier it becomes, and things are unlikely to get simpler in the weeks and months ahead,’ the ial said.
