If Beijing is expecting an immediate boost from abandoning its tough controls it is mistaken
If Beijing is expecting an immediate economic boost from abandoning its tough controls it is mistaken. There will be a growth dividend from the policy shift but the state of the world’s second biggest economy will get worse before it gets better, and it will be next spring at least before the easing of restrictions starts to pay off.may experience a technical recession this winter as workers stay at home for fear of becoming infected, leaving factories short of staff.
People are changing their behaviour either because they have the virus or because they think they might become infected. Subway use in Beijing, where the increase in cases has been sharpest, is running at 20% of pre-pandemic levels.of goods, the implications are obvious. Companies will find themselves facing staff shortages. Production levels will fall and supply chain bottlenecks will intensify, adding to inflationary pressure in developed countries such as the UK.
As Susannah Streeter, an analyst at Hargreaves Lansdown, says: “Mass hospitalisations are likely to prompt a fresh bout of trepidation for consumers and businesses and constrain the Chinese economy further, while the prospect of fresh supply chain snarl-ups could prolong the price pains being felt in countries around the world.”, estimates China’s economy will contract by 2.5% this year and expand by 2% next year – a far cry from the double-digit annual growth rates notched up a decade ago.
“For the economy, reopening has so far been entirely negative,” he says. “Activity has been depressed for most of the past year as fear of getting forced into quarantine has kept people at home.Sign up toGet set for the working day – we'll point you to the all the business news and analysis you need every morningNewsletters may contain info about charities, online ads, and content funded by outside parties.
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