The fallout from China’s zero-COVID policy | WARC | The Feed

The fallout from China’s zero-COVID policy

The economic impact of China’s zero-COVID policy is becoming increasingly apparent, both domestically and internationally, as new figures show how the country’s services sector has been hit and quarterly earnings calls reveal how multinational companies have been affected.

Why it matters

Health policy decisions made in Beijing continue to have global consequences. One consequence may be that international businesses start to reassess the level of their investment in China.

The domestic impact 

The Caixin China services purchasing managers’ index fell to 36.2 in April, from 42.0 in March and 50.2 in February, the Financial Times reports. The trajectory is similar, if less steep, to that seen in early 2020 when the coronavirus was first recognised. But there is a possibility the economic effects could be worse: the FT notes that 2020 restrictions focused on Wuhan, while those of 2022 have been centred around Shanghai and its high-tech manufacturing businesses.

Public health measures are now being tightened in other parts of the country, with fears some cities may become locked down in all but name, with knock-on effects on the local economy and beyond.

The international picture

A survey by the European Union Chamber of Commerce in China, reported in the New York Times, found 92% of respondents have seen their supply chains affected by COVID-related restrictions. 

Meanwhile, businesses from Starbucks to GE and Apple have warned in recent earnings calls that conditions in China are hitting sales, because of reduced consumer demand there or limited supply of materials/distribution of finished products, or both. 

Key quote

““How [the consequences of the lockdowns] play out is not something that we have a handle on. I don’t think anybody really does” – Larry Culp, CEO, GE, speaking to analysts as reported in the Financial Times.

Sourced from Financial Times, New York Times, CNBC [Image: Timothy Chambers on Unsplash]