China digs in on zero-Covid policy as experts warn of economic damage

China has intensified propaganda efforts to drum up support for its "dynamic zero-Covid" policy just as experts and companies warn of the heavy economic blow from extended lockdowns.

On Thursday, China’s official Xinhua news agency published an article warning that the country’s medical system risked “breaking down” in the event of a mass Covid outbreak. It echoed President Xi Jinping’s comments a day earlier, calling for citizens to “overcome complacency” in “response to the virus’s mutation”.

“The global pandemic is still severe, so we cannot relax the controls now,” Mr Xi said during a visit to the southern province of Hainan.

Beijing’s decision to enhance its lockdown measures to fight the spread of the highly infectious but milder Omicron variant stands in marked contrast to most of the world, which is learning to live with the virus.

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Bo Zhuang, a Singapore-based analyst at Loomis Sayles, said local governments were “hugely underestimating” the economic damage caused by lockdowns, which have disrupted logistics networks and frozen intercity connections that enable the flow of goods.

"China's economy relies on supply chains," said Mr Zhuang, pointing to how several electric-vehicle makers, including Tesla, have suspended production because they could not source components.

Dozens of electronic components manufacturers in Kunshan, which neighbours Shanghai, halted production this week after lockdown measures were extended.

Fast Retailing, the Japanese parent group of fast-fashion clothing brand Uniqlo, said profits would fall significantly this year due to the lockdowns. Mainland China is the company's biggest market with 863 stores, but 133 outlets were forced to close in March.

Shanghai, the centre of China's worst outbreak since the pandemic began in Wuhan in early 2020, reported 27,719 cases on Wednesday, according to data released on Thursday.

In late March, authorities imposed a two-stage lockdown that was expanded to encompass the entire city of 26 million.

One official close to China’s Centre for Disease Control and Prevention expressed concern about tightening controls on the healthcare system.

The official, who did not want to be named, said: “From a medical standpoint, I don’t think the zero-Covid policy is viable any more. Shanghai is running out of medical professionals to measure test results and beds to accommodate patients.

“If we don’t want to live with Covid, the only solution is to become stricter.”

Many residents struggled to gain access to food and medical supplies at the start of the lockdown, though some say those shortages have begun to ease.

But people across China have started bulk-buying essentials with an eye on the challenges posed by the lockdown in Shanghai. Economists at Nomura, the Japanese bank, estimated that 45 Chinese cities and 373 million people were under full or partial lockdown, compared with 23 cities and 193 million people a week ago.

The Xinhua commentary called on citizens to endure the “temporary inconvenience” of lockdown. “Only when the pandemic is controlled can we protect people’s lives ... and create favourable conditions for normal production.” – Copyright The Financial Times Limited 2022