CHINA HAS TRADED economic growth for saving lives in the pandemic — the quid pro quo of its zero-Covid policy — and criticised Western nations for doing the opposite.
A new paper by five economists from Chinese and US universities, led by Jingjing Chen of Tsinghua University, seeks to put a hard number on that hit to the economy.
It is a large one.
The quintet estimates that if the four big cities of Beijing, Shanghai, Guangdong and Shenzhen underwent a one-month full-scale lockdown, China’s real GDP would fall by up to 8.6% during the period.
They reached their estimate by analysing real-time data of inter-city road haulage rather than the more commonly used measure of consumption declines.
Applying their model to the most extreme case scenario — all Chinese cities put into full-scale lockdown for one month — GDP would decline by 53% in the month.
It is unlikely, but not impossible given the Omicron breakthrough, that Beijing, Shanghai, Guangdong and Shenzhen would be put into lockdown simultaneously for that long. Nonetheless, the authors point out that a full-scale lockdown of a single big city would be sufficient to impact national GDP:
The largest three effects come from Shanghai, Beijing and Shenzhen, where full-scale lockdown will knock 2.7%, 2.5% and 1.8% off the aggregate real income, respectively.
The paper gives academic backing to Shanghai authorities’ efforts to avoid a full-scale lockdown of the country’s financial and commercial hub for as long as possible.
The authors note that their research looks at only the short-term impacts of citywide lockdowns and does not consider the effects on expectations and saving and investment decisions in the longer term.
The authors also conclude that a city’s economic size is the primary determinant of the aggregate effect of locking it down. Yet, a city’s position in the country’s trade network plays a more significant role in the spillover effects. These can account for about 10% of the aggregate impact.
The strictness, severity and persistence of China’s lockdowns make international comparisons difficult. However, the authors say that the economic losses caused by Chinese lockdowns are four times as large as those caused by the Italian and Canadian lockdowns in the second quarter of last year.