Zero-Covid leaves a long tail in China

Zero-Covid leaves a long tail in China

For three years, China's zero-Covid policy consistently received high-profile media coverage from the Chinese and the international press. During the first phase of the pandemic, China's mass mobilisation of resources and strict region-wide lockdowns were seen as highly effective. But after vaccines arrived and Western countries resumed normal economic activities, China's ongoing restrictions became a source of growing concern.

Then, when the restrictions were finally lifted in late 2022, the press coverage dissipated, and the official Chinese position was silence. Just as the Chinese people were starting to regain their economic footing and reckon with the emotional fallout of the previous three years, the world stopped paying attention.

Yet the legacy of zero-Covid will not soon be forgotten. For three years, nearly every city was under various forms of lockdown, with as many as 370 million people isolated in their homes at the policy's peak. Shanghai, China's economic hub, was among the cities subjected to the most severe lockdowns.

Today, the pain is felt more broadly, with remuneration and jobs being cut across the urban economy. Salaries in typically high-paying tech and finance jobs have been slashed by 40%, and even civil-service jobs, which pay less but are considered more stable, are experiencing substantial pay cuts. In 2022, urban China's median per capita disposable income (after taxes) was $6,224 (220,000 baht), compared to $55,832 in the US. (Of course, prices are higher in the US)

Worse, the mass layoffs that started in the Chinese tech sector in 2021 have increased over time, with more than 200,000 tech jobs eliminated just between July 2021 and March 2022. And that figure does not account for the knock-on effects in closely connected sectors such as finance or law.

China's much poorer rural areas have arguably suffered even more. In 2022, rural per capita disposable income was a mere $2,777. Generally, rural households supplement their agricultural income by working as migrant labourers in cities, opening their hometowns to tourists from urban areas or abroad. But during the zero-Covid period, rural villages were cut off from urban markets and tourists.

Making matters worse, zero-Covid's demands on public spending deepened local government debt, and now the country's enormous real-estate sector is in crisis, with overall growth continuing to slow. The full costs of Covid and the lockdowns are still being tallied. While the youth suicide rate ticked up notably in the US during the pandemic, it doubled in China between 2019 and 2021.

When the government did finally finish lifting zero-Covid restrictions, the vaccination rate was still low among the elderly, and there was little time for hospitals and health workers to prepare for the one billion infections that soon followed. Given the sheer size of that figure, China did better than many expected. The virus did not mutate into a more virulent form. An estimated two million people died in the two months after the end of zero-Covid, but that means China still had a much lower mortality rate than the US.

China's bigger problem was that all these deaths came suddenly, thus overwhelming funeral homes and forcing families to conduct expedient cremations and burials without traditional grieving practices. These experiences, combined with the official silence on the subject, have left a mute but palpable sense of collective pain.

Public reactions to these challenges have been mixed. Not surprisingly, young people who only ever knew China's pre-pandemic "economic miracle" are the most dispirited. Youth unemployment was at a record high of 21.3% this past June, before China stopped releasing such data altogether. Now, many younger Chinese simply want to give up ("tang ping") or leave the labour force.

The older generation is more stoic. Most of those born before the 1990s remember poverty. In the 1970s and 1980s, China was one of the world's poorest countries, and a single bad harvest could mean starvation in the countryside. Older Chinese can endure new hardships knowing that their children will still be better off than they were at the same age.

Some are even cautiously optimistic following the shift in the tone of US-China relations. After years of rising tensions, recent diplomacy signals a return to stability, even if not a fundamental improvement in this most important of international relationships. Stability can restore domestic and international investors' confidence in the Chinese economy, thereby generating more tourism, trade, jobs, and pay hikes. There is hope yet for more Chinese to escape poverty and resume a normal life. ©2023 Project Syndicate

Nancy Qian, Professor of Economics at Northwestern University, is Co-Director of Northwestern University's Global Poverty Research Lab and Founding Director of China Econ Lab.

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