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China’s Zero-COVID Strategy Targets Consumer Spending

According to experts, China’s zero-COVID strategy for containing the epidemic has a greater impact on consumers than on producers. Analysts are getting wary about China’s economy as local authorities apply tighter travel restrictions and a few lockdowns to contain the omicron COVID strain. On Tuesday, Goldman Sachs lowered its annual growth prediction. On the other hand, Analysts were concerned about the impact on China’s already slow consumer spending.

According to Ting Lu, Chief China Economist at Nomura, because of Omicron’s high transmissibility, the costs of China’s zero-COVID policy are growing while the advantages are decreasing. He pointed out that the hotel sector has yet to rebound to pre-pandemic levels. Workers in the industry may be depleting their savings and spending less. Manufacturing was not on the list of expenses.

China’s strategy has employed quarantines and travel restrictions to contain breakouts since the pandemic began in early 2020. After a first-quarter contraction, the country became the only major economy to gain that year.

Consumer Spending

Before the epidemic, Wang conducted research comparing GDP growth rates in 2020 and 2021 to a four-year average of China’s annual GDP growth rate from 2016 to 2019.

In a phone interview last week, she added, “By managing the COVID epidemic, China was able to ensure that all nodes along the supply chain were operational, resulting in real agricultural and industrial production… being more than the trend value.”

Compared to the same period the previous year, industrial output climbed by 2.8 percent in 2020. Moreover, it climbed 10.1 percent in the first 11 months of 2021. According to an official indicator known as the Purchasing Manager’s Index, China’s industrial activity unexpectedly increased in December.

Impact on Factory

China’s economy faces several obstacles, ranging from rising commodity prices to a crackdown on the country’s huge real estate industry. However, economic figures show that manufacturing production remains resilient.

According to Yue Su, chief economist at The Economist Intelligence Unit, manufacturers in China are less affected by city lockdowns since firms are often spread out in suburban industrial parks, where staff reside in dormitories.

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