In 2021, China managed to curb the spread of COVID-19 while still growing its economy by an annual rate of 8%. Even as the world’s second-largest economy sealed its borders, foreign direct investment kept flowing, and exports continued increasing. However, analysts believe that China’s draconian restrictions have their own prices. Goldman Sachs said the economic damage of Beijing’s zero-tolerance toward COVID-19 seemed to deteriorate over time as each new variant became more contagious.
The investment bank said Chinese vaccines appeared to have inadequate protection against Omicron. Thus, even as 87% of its population is vaccinated, China is expected to reinstate citywide lockdowns every time it finds new infection clusters, like in Xi’an and Anyang. Strict lockdowns wreak havoc on local businesses, hurt consumer confidence and spending while also snarling up supply chains. As a result, downward pressure on industrial output and retail sales continues to grow.
Goldman Sachs lowered its China GDP growth outlook for 2022 on expectations of more COVID-19 restrictions on business activity. It projects China’s GDP to grow 4.3% in 2022, compared to its previous forecast of 4.8%, citing downward risks from the latest outbreaks. The Wall Street bank also noted that in an extreme scenario which includes a nationwide lockdown, China’s annual growth could plummet to 1.5%, the worst performance since 1976.
