Explainer | What has China done to minimise impact of zero-Covid, and why are global-recession risks rising?

‘Confluence of shocks’ – including Ukraine war, coronavirus outbreaks in China, and the US Fed’s monetary tightening – are raising alarms over global economic growth

Beijing had vowed that ‘stability’ would be the top priority this year, but analysts say ‘2022 has been anything but stable’, and leadership ‘must feel so disappointed’

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Nearly two months after Shanghai was placed under lockdown, there are growing concerns among economists of far-reaching disruptions. Photo: Reuters

Published: 8:30pm, 18 May 2022Updated: 8:59pm, 18 May 2022

China’s policymakers have heralded fiscal easing to help mitigate the wide-reaching impact of its zero-Covid strategy – but have yet to fully act, while a recession in the global economy is now among the new threats to global growth, according to various estimates.

Major indicators measuring the state of the world’s second-largest economy fell short of expectations in data released on Monday, with industrial production, retail sales, fixed-asset investments and the surveyed jobless rate falling to their weakest levels in more than two years.

“China’s economy fell into a temporary recession, caused by the widespread lockdowns,” Macquarie Group said in a note on Monday. “China’s policymakers must feel so disappointed at this moment. In the Politburo meeting last December, they hoped for an uneventful 2022 by calling for stability as the top priority. Unfortunately, 2022 has been anything but stable.”

The International Institute of Finance (IIF) said in a report last week that global recession risks are rising amid the fallout of Russia’s invasion of Ukraine, coronavirus outbreaks in China and tightening monetary measures by the US Federal Reserve are adding further pressure to global growth.

“The confluence of these shocks threatens global recession. We are downgrading global growth significantly, such that we see a de facto flatlining in world gross domestic product (GDP) in 2022. That leaves little room to avoid an outright GDP contraction. Recession risk is elevated,” the IIF said.

Analysts believe China’s zero-Covid policy, which mandates mass testing, lockdowns and quarantines, will continue to suppress growth in the coming months. China is one of the few countries maintaining a policy of eliminating Covid-19, as most of the world has begun to live with the virus and vaccinations.

Explainer | What has China done to minimise impact of zero-Covid, and why are global-recession risks rising?

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