Weekly Brief: What happens to a Megacity under Lockdown?

Why is there a lockdown?

For the most part, since the pandemic began in late 2019 - early 2020, China had been successful in containing the virus and keeping infection rates and mortality rates low compared to many other nations. However, with a recent spike in cases in Shanghai – which had previously never been under lockdown – some of the strictest restrictions have been imposed on the megacity that has a population of 26.32 million. What sets this rise in cases apart from before, though, is that most cases are asymptomatic.

Source: Johns Hopkins University

Social Costs

Unlike the global trend of living with the coronavirus, China has so far remained loyal to the Zero-Covid strategy. Certainly, it has been successful in keeping the country relatively safe from the virus in the past two years, but the lockdowns, especially that in Shanghai, have not come without a cost. Residents were unable to leave their neighborhoods, and in many extreme cases, unable to even leave their homes for an extended period of time. Those who tested positive were often led to large quarantine facilities, even if they exhibited no symptoms. Such restrictions on freedom have, in some cases, led to great consequences. With hospitals shut down and regulations to keep people inside their homes, there have been reports of worsening non-COVID-related medical conditions and deaths as a result of not receiving urgent medical care. All these factors combined have fueled growing frustration among the public.

Economic Costs

A look at indicators

Locking down a megacity the size of Shanghai undoubtedly has large economic costs. As of 2021, Shanghai accounts for more than 3.5% of China’s GDP, which is approximately 4321 billion Yuan. With a dramatic drop in spending, Shanghai’s service sector-driven economy took a significant hit. According to the National Bureau of Statistics in China, GDP grew by 4.8% compared to the same period last year. Though higher than many forecast estimates, it falls short of the country’s goal to grow by 5.5% this year. Specifically, sales in the retail sector declined by 3.5% in March of this year. The unemployment rate grew to the highest since May 2020: 5.8%.

Food & Oil

Specific sectors of the national and global economy have been heavily affected as well. Food shortages caused by increased demand and constricted supply have driven food prices up by 17.2% in March. Coupled with the Russia-Ukraine crisis, oil prices became even more volatile as a result of the lockdown. At one point at the end of March, oil prices dropped more than 8% as investors feared a decline of demand from the world’s largest importer of oil.

Gradual easing

Currently, with slowly declining infection rates and rising social and economic costs, the tight restrictions are gradually easing. A total of 12 million people -- almost half of the population – are now allowed to travel outside of their homes, and factories are slowly resuming production. As COVID shows no signs of slowing down around the world, countries are now tasked with finding the right balance between curbing infections and maintaining the economy.

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References

BBC. (2022, April 18). Shanghai lockdown: China spending and employment hit. BBC News. Retrieved April 21, 2022, from https://www.bbc.com/news/business-61137195

Disis, J. (2022, April 13). Here's how China's lockdowns are rippling through the economy. The Japan Times. Retrieved April 21, 2022, from https://www.japantimes.co.jp/news/2022/04/13/business/economy-business/how-lockdowns-ripple-china-economy/

NPR. (2022, April 20). Shanghai eases COVID rules and allows 4 million more people out of their homes. NPR. Retrieved April 21, 2022, from https://www.npr.org/2022/04/20/1093697094/shanghai-eases-covid-rules-and-allows-4-million-more-people-out-of-their-homes

Shanghai lockdown could shave off about 2% of China's total GDP. The Economic Times. (2022, April 15). Retrieved April 21, 2022, from https://economictimes.indiatimes.com/news/international/business/shanghai-lockdown-could-shave-off-about-2-of-chinas-total-gdp/articleshow/90850530.cms?from=mdr

Stevens, P. (2022, March 28). Oil slides more than 8% as Shanghai Lockdown prompts demand fears. CNBC. Retrieved April 21, 2022, from https://www.cnbc.com/2022/03/28/oil-slides-7percent-as-shanghai-lockdown-prompts-demand-fears.html