How China's Adamant Zero-Covid Policy Is Affecting Its Economy

Mass testing of China's vast population could bring fresh misery to the economy, experts warned Friday, after Beijing vowed to regain control of the narrative around a Zero-Covid policy that has strangled growth and fanned anger across the country.

Leaders have taken a strong approach to stamping out virus outbreaks, locking down Shanghai -- the country's economic dynamo and biggest city -- and slowly restricting movement in Beijing over dozens of new cases.

Authorities have refused to bend to mounting public outcry at food shortages and spartan quarantine conditions in Shanghai, with top officials on Thursday pledging to "unwaveringly adhere" to Zero-Covid and "fight against" criticism of the policy.

China's government has brandished the strategy as proof that it values human life above material concerns and can avert the public health crises seen in other countries.

But the approach is hammering the economy and posing a sharp political challenge to President Xi Jinping.

He now has to convince an increasingly unsettled public, which has cascaded its anger at lockdowns onto social media, that the trade-off between the economy and lives is sustainable.

At Thursday's meeting -- attended by The President, the nation's top brass pledged to "resolutely fight against all words and deeds that distort, question or reject our nation's disease control policies".

Experts fear Beijing's game plan will weigh heavily on the world's second-largest economy.

Analysts at Nomura on Friday predicted that mass testing mandates alone could cost up to 2.3 percent of annual gross domestic product.

Shanghai's 25 million residents have been tested several times, while some of Beijing's 21 million people have also undergone repeated rounds of checks -- a policy the government has hinted may be extended across the country to combat the highly transmissible Omicron variant.

Nomura said a requirement that half of the world's most populous nation took one test every three days would cost around 0.9 percent of GDP, while any demand that 90 percent of the population takes a test every two days would cost 2.3 percent.

The restrictions could carry "quite high" costs if expanded nationwide, while offering only "limited" benefits as the hard-to-contain Omicron strain may trigger lockdowns in more cities, said Ting Lu, Nomura's chief China economist.

The grim prediction follows a Fitch Ratings cut to its forecast for China's full-year economic growth to 4.3 percent, from 4.8 percent.

That is well off the government's official target of 5.5 percent.

A key index of service sector activity slumped to 36.2 in April, the second-lowest on record, in what some experts said is a stark pointer of a country in recession.

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