On December 7th, China’s Central Government shocked its population (and much of the world for that matter) by completely dropping most of the Covid restrictions that have been in place for the last three years.
Speculation runs high as to why this reversal was implemented. One theory is that this decision was put in place to stem the tide of widespread street protests in numerous cities- a typically underheard of occurrence. A number of events occurred last summer and fall that some feel resulted in a tipping point being reached- touching off the wave of protests.
- Hong Kong had successfully fended off four waves of infection for two years before a fifth wave swept throughout the city, killing over 9,000 people. Scientists estimated that at least half the population of Hong Kong had been infected.
- From March to May last year, Shanghai was subjected to a brutal two-month lockdown after weak vaccination coverage (some estimating only a 17% efficacy rate) left the population particularly vulnerable. This lockdown shook the confidence of foreign companies, particularly in global shipping and auto manufacturing.
- In September, a bus crash occurred in the city of Guiyang killing 27 people who were being sent to compulsory quarantine.
- Unrest over draconian lockdown measures was brewing. It is now thought that the strict focus on testing, causing long lines across cities daily actually contributed to increased infections. People standing in line for hours (who ultimately tested positive) were infecting those around them.
- Public unrest exploded into widespread protests after a fire in a residential building in Xinjiang killed ten people. It was thought that emergency workers were not able to reach the building in time due to the Zero Covid restrictions in place.
- Workers at a Foxconn factory that makes iPhones in Zhengzhou clashed with riot police during a lockdown.
Each act of public defiance led to concessions by authorities. Then, the Central Government abruptly changed its policy from that of rigid focus on testing to that of merely recommending that citizens avoid public gatherings, eschewing hospitals unless gravely ill, and encouraging vaccinations. The border has been reopened with strong encouragement for travel to return to normal (6% of Hong Kong’s economy comes from Chinese tourism). Currently, a 50,000-person quota is in place at the border crossing between China and Hong Kong. This is reflective of pre-pandemic levels.
Another theory exists to explain China’s reversal of policy- the toll that the Zero Covid policy has been taking on its economy. In 2020 & 2021, China’s economic growth rate was 5.1%. In 2022, this dropped to just 2.7% and it is estimated that in 2023 it will be 4.3%. Clearly, the pandemic and China’s hardline approach to its Zero Covid policy have caused its economy to be battered. Furthermore, China’s strategy in combating Covid has tarnished its reputation throughout the world for predictability and efficiency. And Chinese economists say economic growth above 5% this year is vital to maintain social stability and lift market confidence.
In Hong Kong, a full-scale effort is being introduced to encourage Mainland Chinese travel and tourism. The city is speeding ahead to repair its economy and make up for lost time over the past three years. Without a doubt, the Hong Kong economy will need time to recover. The International Monetary Fund has forecasted global growth at just 2.7% in 2023, compared to 3.2% in 2022. Hong Kong is heavily impacted by economic trends worldwide.
Concerns remain high that China is not out of the woods with the pandemic. The generally accepted prognosis is that infections will further spike after the Chinese New Year holiday (and all its associated travel) ends. Due to the strict focus on testing regimes, China has seriously underestimated its need for hospital systems that can handle surges in infections. And its vaccinations have proven to be less effective, requiring more frequent boosters. Currently, only 68.7% of people aged over 60 and 40.4% of people over the age of 80 (a population of 8 million people) have received just two shots.
It remains to be seen at what rate the global business community returns to travel to China. Perhaps the Marchâ€“May timeframe will be very telling as to what the Covid situation looks like, and how enthusiastically business travelers plan their travel.