The View | As costs of ‘zero Covid’ mount, China’s economy needs urgent rescue

The emergence of Omicron has rendered its ‘zero Covid’ strategy uneconomical and unsustainable, and China must reopen its struggling economy

This means preparing its healthcare system for a surge in cases, and easing its monetary policy to boost confidence and consumption

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An aircraft ground personnel wearing a protective suit looks at a phone as passengers prepare to board an aircraft at the Beijing Capital International Airport in Beijing on November 30. The welfare loss from the zero-Covid strategy now greatly exceeds that of a strategy of living with the virus. Photo: EPA-EFE

Published: 9:30pm, 1 Dec 2022Updated: 4:40pm, 2 Dec 2022

Globally, many countries have now fully reopened amid the Covid-19 pandemic. China’s implementation of the “zero-Covid” strategy during the Delta wave provided a competitive advantage for development. However, now that Omicron and its variants are dominant and are expected to remain so for the foreseeable future, China should revisit its zero-Covid policy.

In the EU, Britain and the US, where economies have completely reopened, the average excess mortality rate for this year is estimated to be less than 10 per cent. If the same applies to China, a policy shift to reopen could result in up to 1 million additional deaths per year.

If we take the estimated average value of a statistical life in China to be about 2.2 million yuan (US$309,000), based on various research, the loss caused by Covid-19 deaths every year would reach at most 2 trillion yuan, or 2 per cent of China’s gross domestic product (GDP).

This number might be an overestimation of the losses as most patients dying from the Omicron variant are more than 80 years old and their life expectancy is significantly shorter. There are not many credible studies on the quality-adjusted life-year losses per Omicron infection. But if based on the data from the Delta wave, the total welfare loss from Omicron, including death and long Covid, would be around 1 per cent of China’s GDP.

On the other hand, China’s potential growth rate was projected around 5.2 per cent this year, but its actual economic growth rate is expected to be around 3.2 per cent. This translates to an economic loss from the zero-Covid strategy of about 2 per cent of GDP.

In addition, this number does not account for government spending to enforce mass testing, lockdowns and other preventive measures. Therefore, the welfare loss from the zero-Covid strategy greatly exceeds that from the “living with Covid-19” strategy.

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.css-1m2rp1p{color:#34b8b5;}The View | As costs of ‘zero Covid’ mount, China’s economy needs urgent rescue

The View | As costs of ‘zero Covid’ mount, China’s economy needs urgent rescue