Beijing’s COVID failure won’t stop the relentless rise of China

Shanghai has been in a total lockdown for weeks. There is mass testing in Beijing, travel restrictions and a full closure of the capital may not be far away. Other mega-cities will soon follow as the omicron variant rips through the country. China is increasingly looking like an economic and political disaster zone. It is committed to a crazy zero-COVID policy that will take a huge toll on its society and economy – New Zealand, except amplified to the power of a thousand.

Not very surprisingly, the China bears are out in force, predicting that weaknesses in its centralised, autocratic system are about to be brutally exposed, and that its rise to global pre-eminence will be stopped dead in its tracks.

China’s economic rise has a long way to run. Credit:AP

It is a tempting narrative – and yet it is also fundamentally flawed. True, President Xi Jinping and his ruling clique have made plenty of mistakes in their COVID strategy, although they are hardly unique in that. They should have got shots into people’s arms faster. Even so, there is growing evidence a triple dose of the Sinovac shot delivers acceptable levels of immunity.

Lockdowns might be harsh, but they will make sure the healthcare system is able to cope while vaccination delivers enough immunity to deal with the virus. By the autumn, the relentless rise of its economy will be back on track – and it will take more than COVID to derail China.

With the war in Ukraine raging, and money markets struggling to cope with soaring inflation and rising interest rates, it is easy to ignore what is, without question, a far more important story for the global economy. While the rest of the world has more or less forgotten about COVID, and completely reopened, China is stuck in 2020.

Shenzhen started locking down in January. By March, Shanghai had gone into a total lockdown, with travel into and out of the city severely restricted, a strict quarantine regime, mass testing, and the closure of offices, schools and factories. Beijing has already started mass testing alongside selective lockdowns and it would hardly be a surprise if the whole city was sealed off over the next couple of weeks. Many other mega-cities may follow. After all, as we already know, omicron rips through countries at lightning speed.

That is hardly a minor matter. New Zealand and Australia’s zero-COVID strategies were interesting experiments for public health officials. But neither country makes much difference to the global economy one way or another. By contrast, China is the second largest economy in the world, and was set to overtake the US this decade. Its manufacturers are crucial to supply chains globally, and with container ships backing up in Shanghai’s massive harbours, those were already creaking. Its money and investment drives the world’s markets. What happens in China determines what happens in the rest of the world.

Its zero-COVID strategy has brought out the bears in force. Lockdowns will hammer an economy that still relies heavily on manufacturing; you can’t make microchips, cars or phones working from home. It will provoke social unrest, the bears argue. And it will expose the limitations of China’s top-down, controlled management of society, potentially even provoking a challenge to Xi’s rule (hardly helped by his backing of Vladimir Putin’s catastrophic invasion of Ukraine). The benchmark Shanghai index is down from 3,600 to 3,000 so far this year as investors take flight, and surveys show foreign companies are increasingly weighing up whether they should pull out of the country.

The rise of China, and its powerhouse economy, remains by far the most important story of the 21st century. It may come apart one day. But COVID, and a few weeks of lockdown in its major cities, won’t prove its undoing.

True, COVID has hardly been well-handled, and that is even before we get into the question of how the virus originated. China has been too arrogant to buy the superior Western vaccines, and too slow to vaccinate, especially among the elderly. When the hyper-infectious omicron variant hit, China was caught unprepared, and left with little option except to start closing cities down, whatever the cost to its economy. If it let it rip, as Hong Kong showed, the health system could have been overwhelmed.

And yet it is simply ridiculous to pretend that this is anything more than a minor setback or that the lockdowns are insane. The latest evidence suggests that three doses of the home-grown Sinovac vaccine is at least as effective as the Pfizer and Moderna shots, and possibly even better for the over-eighties, the most crucial sector of society to protect. Once those third shots have been delivered, China will be in far better shape.

It will take more than COVID to topple China’s economy.Credit:Bloomberg

Australia’s experience suggests that, realistically, lockdowns followed by mass vaccination, are an effective policy, controlling death rates at relatively low cost. Shenzhen, the country’s key tech hub, is now fully reopened again after a lockdown that lasted two months. The chances are that Shanghai will be similar. And Beijing may well avoid total closure.

Crazy? Not really. When the final tally is reckoned, China’s death rate will probably be lower than most other countries, and at far lower cost.

The key point is this. The rise of China, and its powerhouse economy, remains by far the most important story of the 21st century. It may come apart one day. But COVID, and a few weeks of lockdown in its major cities, won’t prove its undoing. It is far too strong for that, and has too much momentum behind it.

By later this year, the temporary lockdowns will have been forgotten, the ports reopened and restrictions lifted. China’s economy will be roaring once again, while the US and Europe are back in recession and working out how to pay for the ruinous cost of closing down society in 2020. In truth, this is just a blip – and China’s rise still has a long way to run.

Telegraph, London

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Most Viewed in Business

From our partners

Source: Read Full Article