(Yicai Global) May 18 -- Shanghai’s lockdown is entering its endgame. Authorities have now reached a state of “zero covid” in virtually all of its districts and broken the chain of community transmission. The mayor of the municipality states said that life will return back to normal by June within the next few weeks. This coincides with a “phased reopening” of businesses throughout the city which the Shanghai Daily has described as restoring “offline operations” of “its malls, markets, eateries, hair salons and other businesses from Monday to guarantee basic daily supplies to its citizens”.
Meanwhile, restaurants will “only receive online orders and offer take-away meals, while hair salons and laundry-related businesses will provide limited and staggered services.” Beyond services, a reported 63% of the 142 critical “whitelist” businesses have already resumed operations, with the list set to be expanded to new batches taking the number up to 562 and 820 respectively. Residents of the city will be relieved that this long and hard-fought battle is nearly over, with the mantle ultimately turning towards orderly restoring life, whilst also of course resuscitating the city’s economy.
In moving forwards, a number of policies will be necessary in order to offset the economic damage caused by the lockdown, not least because of its impact on business revenues, its inevitable increase in local employment, and the overall suppression of consumption that comes with it. This should firstly involve a compensation package for the businesses most hurt by the shutdown, including the owners of restaurants, retailers, cinemas, bars, hairdressers, and other consumer-orientated businesses. This can also come in the form of granting coupons to the population at large in order to incentivize spending.
Secondly, and most likely as an outcome, funds should be allocated towards kickstarting the economy again through investment in infrastructure projects, a move which will be necessary in order to support construction industries, labor-related jobs, and their subsequent supply chains. Thirdly, some monetary-based support should also be given on a local level to help people rebalance their incomes such as temporarily reprieving mortgage repayments, whilst also doing the same for business-based loans and credit. Efforts also should be made to avoid small and medium-level enterprises from defaulting in the midst of the lockdown restrictions.
If policies of this kind can be successfully implemented, then the city is likely to recover quickly from the lockdown experience and not face permanent or long-term damage. Overall, despite the abject negativity spouted in the western media, the fundamentals of the Chinese economy on a national scale remain fairly strong despite facing a global environment of growing slowdowns and uncertainties. Economists in China feel there is little need to resort to “drastic measures” in order to resuscitate growth.
Concerning any potential future risks from China’s continued commitment to the zero-covid policy, people should pay attention to the “Beijing Model” currently being implemented as the ideal norm in such situations, where a full city shutdown is avoided, and impacted neighborhoods are targeted pre-emptively with wholesale population testing regimes. This is what China describes as its “dynamic zero covid” policy.
Given this, everything is coming into place for Shanghai as a municipality to move forwards from this experience, and the steady, yet not rushed, transition back to ordinary life has begun. This transition thus must be met with the appropriate policy response to rekindle growth, whilst foreign observers should ultimately note that the situation is not likely to repeat itself. For those governing the city, the lockdown experience has been a political lesson as much as it has been a necessity, that handling covid pre-emptively and swiftly is the only acceptable means of saving lives in China’s circumstances until there is a tangible change in the scientific situation.