Beijing shows how coronavirus’ impact on the economy can be contained

Beijing authorities responded quickly to the outbreak of a new wave of infections with aggressive mass testing and a partial lockdown, shoring up public confidence
Its playbook should be studied, as the virus is expected to re-emerge from time to time until a vaccine is found

Hao Zhou

Published: 6:00am, 1 Jul 2020

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The coronavirus resurgence and subsequent partial lockdown in Beijing has clearly brought further uncertainties to China’s growth outlook. However, there are new dynamics this time, which might help us better figure out Covid-19’s influence on society and the economy in the future.

First, Beijing’s subway passenger data offers a sense of the impact of the virus and lockdown. Since Beijing reported the first of a new wave of local cases on June 11, its subway passenger volume has experienced a sharp decline – from June 11-23, the average daily volume was about 4.2 million, compared with 6.2 million in the first 10 days of June.

Clearly, people reduced their travel significantly, cutting back on non-essential journeys especially, due to virus concerns. However, if compared with the 5.2 million daily commuters in May and 3.2 million in April, it seems the second wave did not radically change daily life in China’s capital, as we saw happen in January and February when the virus first broke out in Wuhan.

Why the difference? To a large extent, people might be gradually getting used to living with Covid-19. For example, many Chinese were still wearing masks in public and many social distancing measures were still in place even before Beijing reported the second wave of cases.

In the meantime, Beijing’s large-scale testing and contact tracing is working – transparency and efficiency matter at this critical point. As of June 28, some 7.7 million tests had been conducted of the over 8 million samples collected. As about 300 cases have been reported since June 11, the infection rate remains extremely low. More importantly, recent cases were nearly all related to one cluster – Xinfadi food market.

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Salmon import ban and partial lockdown for Beijing after new Covid-19 cases in Chinese capital

Beijing has also learned from Wuhan’s experience in mass testing. Wuhan completed almost 10 million tests in 19 days from mid-May by employing the so-called “batch testing” method. This involves combining a number of swabs from different people to be tested together.

A negative result means all the samples can be cleared, but if the batch comes back positive, medical workers will test each person in the group individually.

Batch testing, which admittedly works only in places where there are few infections, has helped Beijing and Wuhan to expand their testing capacity aggressively. Such an approach has helped ease people’s fear.

Notably, effective virus containment in Beijing seems to have generated positive spillover effects. For example, while subway passenger volumes fell significantly after June 11 in Beijing, the numbers for Shanghai during the same period remain largely unaffected.

From June 11-24, the average daily volume in Shanghai was about 8.4 million, slightly lower than the 8.8 million in the first 10 days of June but higher than the 7.4 million in May.

In the meantime, coal consumption in the five major power plants, which reflects electricity generation in the coastal provinces, has remained steady in recent weeks.

Moreover, the financial markets have been performing smoothly following the virus’ resurgence in Beijing. Renminbi exchange rates have also been stable over the past few weeks.

Why China’s economy will continue to grow and attract investment

Nonetheless, the emergence of a second wave probably means the virus can be expected to re-emerge from time to time. The question is how to deal with it.

Many countries imposed strict lockdown measures when first hit by the virus and have paid a huge economic price. China, for example, reported a gross domestic product contraction of 6.8 per cent for the first quarter of 2020, the worst performance in decades. In Singapore, the government launched a sizeable relief package equivalent to 20 per cent of GDP to help the economy weather the lockdown difficulties.

That said, while a complete lockdown is the most effective way to contain the virus, it is hardly affordable from the economy’s perspective.

Thus Beijing’s second wave might be a useful case study for other countries and cities preparing for the seemingly inevitable virus resurgence. Specifically, a partial lockdown will help slow the virus’ spread; active testing and tracing will help reduce new infections, and; routine personal protection will become a norm. All told, the coronavirus will change our lifestyles dramatically.

Unfortunately, there are still many uncertainties down the road. During the virus resurgence in Beijing, two frequently asked questions have been: where does the virus originate and, why is it related to a food market? If the virus can be carried by food and transmitted via seaborne shipment, many companies would be forced to rethink their operations, which could reshape the global food supply chain.

Before a vaccine or treatment is found, we must learn to live with the virus. Some economic costs will be inevitable, but to avoid another complete lockdown that many have experienced, we need to take a more practical approach to deal with the expected resurgence in cases. Beijing’s experience is therefore worth studying.

Hao Zhou is senior emerging markets economist at Commerzbank

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