Days after the northern Chinese city of Shijiazhuang reopened after a Covid-19 lockdown, barista Lu Mengyuan donned her apron, applied her eye glitter and once again whipped up coffee and hot Chinese crepes for residents who were slowly venturing out of their homes.
Like many others, Lu believed the city’s abrupt reopening amid a Covid wave and its promise to end mass testing represented a turning point. “We are the first in China, an experiment,” she said last Wednesday. “We will not lock up again.”
This week, however, Lu was once again isolated and her silver Airstream coffee truck closed as authorities responded to a near-record number of new Covid cases spreading across the country by reinitiating lockdowns. “I really have balls on my face,” she said.
Analysts and investors had hoped that a series of more moderate Covid control measures announced by the Chinese cabinet on November 11 would mark the beginning of a shift to living with the virus.
Instead, looser policies and confusing signals from Beijing have fueled a growing Covid outbreak, with new cases approaching 30,000 a day. Parts of the population were cordoned off again to prevent transmission.
“Some local governments were confused, but the central government has now given a clear signal: China is not giving up on containment for the time being,” said Ernan Cui, an analyst at research group Gavekal.
“Tightening Covid controls in areas with outbreaks appears to be their only option. The economy could be under more pressure as the government buys time to prepare for living with Covid.”
Life has slowed in the Chinese capital, with the largest district, Chaoyang, largely closed. Residents in the southwestern metropolis of Chongqing are trapped at home while lockdowns have widened in the southern manufacturing hub of Guangzhou. Violent worker protests at the world’s largest iPhone factory erupted in the central Chinese city of Zhengzhou on Wednesday as authorities at the giant Foxconn plant struggled to contain a Covid-19 outbreak.
“The costs are becoming unbearable. It’s frustrating,” said William, a chauffeur stuck in Guangzhou’s Haizhu district. He added that the area’s initial three-day lockdown had already been extended four times.
The impact of China’s recurring Covid outbreaks and lockdowns is not limited to its borders. Slowing demand has hurt sales for global companies like Nike, helped contain oil prices and battered global supply chains.
Goldman Sachs forecasts gross domestic product to grow 3 percent this year and 4.5 percent in 2023. China’s official target is growth of 5.5 percent this year. Any reopening would likely be “messy and bumpy in the early stages,” Goldman said.
The recent zero-Covid policy reversal had a major impact on Shijiazhuang, which tumbled from empty to busy to empty again in nine days. His decision last week to abolish and reopen mass testing put the city on the right track to living with Covid.
“We wanted to do what people asked for. We wanted to open up, but then we did and everyone was scared,” said an official at the city’s Center for Disease Control and Prevention. “The changes have been rapid. We totally confused the residents.”
The official added: “The government faces a dilemma. China’s economy has evolved into what it is now. It is not good . . . [but] If we open up fully, hospitals will be overrun, not just with Covid cases, but with the other underlying disease that produces it. It will require a lot of medical resources. We will be overwhelmed.”
Analysts said China must increase immunizations for the elderly and prepare the health system to minimize deaths if it reopens. Only 66 percent of people over 80 have had two Covid shots.
Shijiazhuang is the provincial capital of Hebei and, with 11 million inhabitants, is also one of the poorest cities in China. Covid lockdowns in September and again in early November had already taken a toll on businesses, a phone dealership owner said. “A lot of people didn’t make it,” he said.
The city’s budget documents blame falling land sales and rising spending on essentials like pandemic prevention for the 25 percent year-over-year drop in revenue and the 29 percent increase in spending. It has left an “unprecedented gap between revenue and expenditure,” the city’s deputy finance chief Zhou Qiao’e warned in August.
Local governments across the country are facing similar challenges as lockdowns and a collapsing housing market eat into revenues while spending on Covid testing and prevention soars. Nomura economists estimate 412 million Chinese residents are facing some sort of pandemic restriction or lockdown.
“The leadership agree they need to avoid Shanghai-style lockdowns but the issue is what kind of balance [between containment and opening] they can achieve,” said Ting Lu, Nomura’s chief China economist, referring to the financial hub’s two-month lockdown this year.
“In the short term, they could agree on a new balance, which could still be quite restrictive given the rising Covid cases.”
Ambulance driver Xue Zhikun was thrown into the middle of Shijiazhuang’s political debate last week. Demand for its services, which bring potential Covid cases to the city’s quarantine hotels, fell. “I only brought six people in this morning,” he said last Wednesday as he removed his respirator and white hazmat suit outside a quarantine hotel.
Business picked up for Xue this week after the government renewed mass testing – until he tested positive himself. In his protective gear, Xue drove his ambulance to the most luxurious quarantine hotel he knew to check himself in. “I have a fever and a headache,” he said. “The virus comes through every hole.”
Noting the magnitude of the recent outbreak, Gavekal’s Cui said the “likelihood of failure in Covid containment is now higher than ever”.
Additional reporting by Nian Liu in Beijing