These are the Consequences of the Quarantine in Shanghai

The coronavirus has been living with us for more than 2 years and in many countries, it seems to be history. Everyday health restrictions are lifted or are more and more ignored. However, now China is going through a period of confinement and harsh measures to reduce the contagion experienced in the country.

Even after several months, the first deaths related to COVID-19 were recorded in China. These are three older adults who worsened their situation after entering the hospital. Local media identify 2 women and a man, between 89 and 91 years old, who had previous health problems related to coronary heart disease, diabetes, and high blood pressure.

Although coronavirus-related deaths seem few in a city of more than 25 million people, deaths unrelated to COVID-19 have increased. The Peterson Institute for International Economics (PIIE) assured that the number of people negative for coronavirus who have died has increased because the authorities have denied them treatment.

On Monday of this week, in Shanghai alone, more than 22,000 new cases were reported, where more than 10% were asymptomatic cases.

Since March, the Chinese authorities have decreed a strict quarantine in the city of Shanghai, a metropolis of more than 26 million inhabitants. Prolonged confinements, prohibition to leaving the apartments, low food supply, and even the sacrifice of pets have created a real problem for health and the political environment.

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The authorities have shown no signs of wanting to ease the measures. Given a scenario with low vaccination rates and a zero-tolerance policy, the restrictions may last a couple of weeks. But this health crisis in Shanghai cannot be taken lightly. If it is true that China presents favorable records in economic growth in the first months of this year, the closure of the most populous and richest city may represent subsequent growth and employment problems.

An Obstacle to China's Economic Revival

China is beginning to show signs of economic recovery. In just the first 3 months of 2022, the Chinese GDP grew by 4.8% compared to the first quarter of 2021. This comes after not only the pandemic, but also the Evergrande real estate crisis, the container crisis, and the problem generated for world trade by the blockage of the Suez Canal.

Now, the lockdown of the most populous and richest city in the country can also mean a blow to economic growth. This may cast doubt on the expectations of 5.5% growth that China expects to have throughout the year (which in itself is pessimistic). A model created by Michael Song, an economist at the Chinese University of Hong Kong, estimates that the 1-month lockdown in Shanghai may represent a 3% drop in national GDP.

This could even get worse if travel and mobility restrictions start to be tightened in other Chinese cities. Unemployment has even reached the level of the start of the pandemic. In March, national unemployment reached 5.8%, reaching levels of May 2020, with falls in trade sales of 3.5%.

Election Year in China

Although China does not behave like a democracy, there are elections to elect the national leader. In a one-party system, the leader of the Chinese Communist Party is therefore the president of the nation. And this year, at the end of 2022, the Chinese Communist Party will have to elect its head again.

No big surprises are expected and Xi Jinping's re-election for the second time in a row seems certain. But, the Government's political campaign has focused on favoring the health of the people, above economic indicators. This can give political returns, however, within the city of Shanghai itself, the rejection of strict measures has been general and this can generate some kind of friction in the elections.