In 2020, China's economy accomplished an unforgettable feat.
As the severity of the coronavirus became clear, officials quarantined over 60 million people in and around Wuhan, with lesser contamination in other regions of the country. The economy imploded in the first quarter, not only registering the country's first quarterly recession in modern history but also at a catastrophic 6.8 percent.
However, the containment procedures were successful; the virus was virtually wiped from China, and economic development resumed. The country was the only big economy to grow by 2.3 percent this year.
A similar story looks to be emerging this year, but it may not have such a joyful conclusion.
As of 2020, major lockdowns have occurred in many sections of the country, most notably in Shanghai, the country's financial capital. However, numerous factors are now at work that may exacerbate the economic consequences, even if the virus is once again brought under control.
And that is huge because the omicron variety is significantly more virulent than the original strain, although being less lethal. The World Health Organization and American health czar Anthony Fauci praised the tough 2020 lockdown measures at the time, calling them unique public health decisions that gave the rest of the world time to prepare.
In contrast, identical curbs implemented this year as part of China's so-called zero-Covid policy are receiving considerable condemnation from both public health and economic experts.
Economists are pessimistic, in part due to a convergence of headwinds plaguing China's economy, which threatens to intensify the already crippling lockdown consequences.
For one thing, Shanghai and, to a lesser extent, Beijing is significantly more economically important than Wuhan. According to current statistics and experts' estimates, the two-month Shanghai lockdown not only had an outsized impact on China's economic health but also looked to have undermined the city's long-standing appeal as a magnet for international investment and talent.
Because of the shutdown, no automobiles were sold in Shanghai in April, according to Bloomberg, citing the Shanghai Automobile Sales Association. According to the group, 26,311 automobiles were sold in the city in April 2021, Bloomberg reported.
In other words, port closures, suffocated road freight, and high shipping prices are only the immediate consequences. Data accumulation portrays a picture of long-term devastation.
According to a recent study conducted by the European Union Chamber of Commerce in China, about a quarter of the enterprises surveyed are considering leaving the country owing to the Covid-19 laws, the largest number in a decade.
"The Chinese market's dependability has long been one of its strengths." "That has gone out the window," said Joerg Wuttke, president of the chamber, at a news conference following the survey.
According to The Wall Street Journal, there is also evidence that more educated and wealthy Chinese are seeking to emigrate.
Furthermore, China's property market — which accounts for about 30% of the country's total GDP — came perilously close to exploding earlier this year, owing to a slew of loan defaults, notably from once-prominent China Evergrande Group. Lending growth slowed to a five-year low last month, owing to a sustained decline in home loans on top of broader economic concerns.
Finally, President Xi Jinping is poised to break with previous trends and run for a third term later this year in what will be the most crucial political meeting in decades. Widespread reshuffling is expected, resulting in "deep uneasiness and tensions throughout the country," according to Cheng Li, head of the John L. Thornton China Center at the Brookings Institution.
Under these uncertain conditions, Xi is likely to stick to what has become arguably his make-or-break policy, "Zero-Covid," regardless of the economic consequences. And the most recent data on the consequences are even worse than experts projected.
In April, industrial production declined 2.9 percent year on year, compared to a consensus projection of 0.5 percent growth. Retail sales fell 11%, compared to a 6.6 percent drop predicted. The jobless rate rose to 6.1 percent, significantly over Beijing's aim.
In 2020, widely respected research by foreign experts estimated that virus-control efforts reduced China's yearly GDP by 2.7 percent. Estimates of such consequences have been increased upward practically weekly this year.
When authorities revealed their 5.5 percent GDP growth forecast for this year, it was dubbed "moderate." As the economic costs grow, it is increasingly being labeled as ambitious, despite being the lowest aim in more than 30 years.
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