The COVID-19 infections in China have increased dramatically in March and may continue to rise in the coming days. Shenzhen, Dongguan, and Changchun, have been locked down for over a week. Shanghai has also significantly tightened its COVID-19 restrictions. In China, the number of asymptomatic cases in the current outbreak is much higher, which is likely due to a combination of the milder symptoms of omicron variants and the vaccinations that reduce the severity of the infection. On the other hand, imported cases have been comparatively high. Moreover, the fact that more provinces have been affected is posing a greater challenge in controlling the outbreak.
People are speculating that China may relax its zero-COVID policy; in fact, the highest health authority in China recently urged regions experiencing severe outbreaks to control the epidemic quickly by taking strict measures. Difficulties in getting most of the population vaccinated effectively via a booster shot present further constraints around relaxing the zero-COVID policy.
Looking at indicators, traffic congestion and subway passenger volume may be affected by the imposed restrictions as well as individual risk aversion. Meanwhile, daily coal consumption provides color on industrial activity. These three measures dropped notably during the past outbreaks of COVID-19 and are showing negative effects. Purchasing Managers’ Indices further indicate that activities held up relatively well in both January and February; however, they may weaken in March. The path of economic growth in 2022 will largely depend on how quickly China controls the outbreak and how much additional policy support it has in place to counteract the hit to its growth.