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The Zero Covid policy aims to stop the reproduction of the virus as soon as it is detected rather than just controlling it. This meant mass test and trace, strict isolation, and extended lockdowns to get an area back to zero infections as soon as possible. China adopted the Zero Covid Policy in January 2020 just weeks after the virus was first detected in Wuhan.
By just looking over the numbers, one might say that the policy is successful in curbing the virus. The total number of deaths due to Covid right from its inception in China is roughly 5,200 in a country of 1.4 billion. It's just a fraction when compared to the US which had 1 million deaths and India which had half a million deaths.
But what these numbers don't account for is the mental agitation and the inhumane conditions of the citizens of China. Covid lockdowns reportedly left residents short of food and essential items for days at an end. The lockdowns also had widespread economic impacts not just in the Chinese economy but all over the world.
The Driving Factor
One of the primary reasons which were given by the CCP (Chinese Communist Party) is by suspending the policy, the effects on the people of China and the Chinese economy will deteriorate. This is somewhat true as the Chinese vaccines, which were given to the majority of the population, are not very effective against newer variants of the virus, like the Omicron. Some estimates suggested ending Zero Covid could overwhelm hospitals with 15 times more people needing hospital beds than those currently available.
Experts also suggested that if there were any large-scale outbreak, it may have potentially derailed the leadership transition ahead of the 20th Party Congress. Even consistent reiteration of the support towards the Zero Covid Policy by the Chinese President Xi Jinping was a reason for the continuation of the policy.
Source: Reuters
Effect on Commodities and Supply Chain Crisis
China's rapid growth and spending on infrastructure have powered demand for global commodities for many years. It is the biggest consumer of commodities in the world and Chinese demand is a significant driving factor for the prices of commodities – particularly base metals and crude oil.
Prices of Steel have fallen by 30% and Iron Ore has fallen by 66% from their recent highs. This is after the massive inflationary pressure from the Russia-Ukraine War. Even though these numbers may seem great for the end consumer, it's very bad for countries like India which is the second-largest producer of Steel after China and fourth largest producer of Iron Ore.
The effect of the recent Chinese Lockdowns can also be seen in the price of Crude Oil which has fallen 40% from its recent peak. This is despite the massive production cuts by OPEC+ nations.
Being titled the "Factory of the World", the Chinese lockdowns have also had their effects on the Global Supply Chain. Even big companies like Apple and Tesla have a lot of exposure towards the Chinese Market. Tesla, which had its second-highest sales in China, had its stock plunge by 58%. Apple which has most of its production in China experienced a plunge in its stock prices tank by roughly 30%.
The Protests
In nearly three years of the Zero Covid Policy, it has been strengthened periodically, isolating China from the rest of the world and restricting people's movements within the country.
As part of the Zero Covid Policy, even if a single person in an area got infected, then everybody in that district or neighbourhood has to be quarantined. Authorities sealed off the driver's cabin with the driver inside for up to 14 days when he passed through a quarantined area.
Naturally, the citizens protested. Major Chinese cities like Beijing, Shanghai, Wuhan and Urumqi saw widespread protests following a deadly fire in Urumqi on Nov 24, fuelling the anger against Covid restrictions which were blamed for hampering rescue efforts.
Follow-up relaxation
Against the backdrop of massive protests, the Chinese Government is finally relaxing its policy, lifting the most severe restrictions.
People with mild or no symptoms are now allowed to isolate at home rather than in state facilities. They also no longer need to show tests for most venues and can travel more freely inside the country. Lockdowns would continue but in a more targeted manner, for example, certain buildings or floors as against whole neighbourhoods or cities.
After seeing such a massive and sudden shift from the Zero Covid Policy, investors also rejoiced, some even speculating China to completely abandon the Policy by mid or end of 2023.
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