HONG KONG -- After midnight on Sept. 18, hundreds of residents of China's southwestern city of Guiyang were dressed in protective hazmat suits and loaded onto multiple buses. They were told they had to be quarantined elsewhere as the facilities within the city were full.
The residents had been tested by local authorities for 15 consecutive days, and none of them ever tested positive for COVID-19. Still, the cash-strapped city, which had logged only one death from the virus since the beginning of the pandemic, had pledged to ensure "zero positive cases" by Sept. 19 to "celebrate the successful opening of the 20th National Congress of the Communist Party of China with concrete actions." Scheduled to begin on Oct. 16, the congress, held every five years to anoint the CPC leadership, is the most important event on the country's political calendar.
The "concrete actions" pledged by Guiyang turned out to be extreme: once any individual was identified as having been in contact with a positive COVID-19 case, everyone in the area had to be sent to quarantine centers, which in some cases could be roughly 300 kilometers away. Meanwhile, the incentive to bus quarantinees out of the city was clear -- it got them out of the city and off the municipal government's official tab. In one of the buses, anxious residents kept asking the driver why they had to be quarantined and where they were going. The driver, who was wrapped tightly in protective gear from head to toe, remained silent. Two and a half hours later, the bus crashed, killing 27 and injuring 20 others.
Such arbitrary and desperate measures are an all too common feature of China's increasingly draconian efforts to contain COVID-19, more so against the backdrop of the congress, during which Chinese leader Xi Jinping is poised to secure a historic third term in office and become the first leader since Mao Zedong to assume the title of renmin lingxiu, or leader of the people. Officials across the country are making every effort to keep a lid on COVID-19 cases, and several have been prosecuted following local outbreaks.
A testing site in Guiyang, Guizhou province, China, on Sept. 9: The zero-COVID strategy is the closest thing President Xi Jinping has to a legacy. © Reuters
But no chances are being taken when the leader's cult of personality is at stake. The zero-COVID strategy is the closest thing Xi has to a legacy as he tries to equate his thin slate of accomplishments over the past decade to those of former leaders Mao and Deng Xiaoping, considered the towering giants of the party, and enter history with the gravitas necessary to justify his continued rule.
But while zero COVID appeared to be a success during the first two years of the pandemic, with China recording far fewer cases than the U.S. -- which had surpassed 1 million COVID-19 deaths by May this year -- it is now becoming a serious liability that has warped the economy and created huge amounts of frustration and suffering.
Now, COVID-19s more contagious, less lethal omicron variant is easily slipping through the net of strict controls. As of Oct. 10, there were 15,404 local positive cases in the mainland, according to the National Health Commission. This is compared to just 1,535 local cases on Feb. 28, before omicron became mainstream. The lower mortality rate of the new variants has left many asking whether China's evermore extreme control measures are worth the cost.
"China found a good balance between economic growth and epidemic control two years ago, but now it is not following science, which is very absurd," said Jin Dongyan, a virus expert at the University of Hong Kong. "If the zero-COVID policy persists, that's actually a step backwards."
The dilemma China faces is clear, say experts: If it keeps its border closed and strict containment measures in place next year while other countries open up, public resentment will mount and businesses will look for alternative markets, dealing a severe blow to the country's already depressed economy. But if and when the country reopens, there will inevitably be mass infections. China's vaccination rates amongst vulnerable, elderly people are low by world standards, and the effectiveness of Chinese vaccines has proved questionable. Moreover, it is one of the only countries that has not experienced mass infections, and thus is far from herd immunity, scientists say. One study published in May, by Fudan University, predicted almost 1.6 million deaths within six months if China relaxes its measures.
However, given the political stakes involved, many believe that Xi may be trapped by previous success. Having politicized his anti-epidemic policy as a demonstration of the superiority of the Chinese system over the U.S., it will be another challenge for him to explain a shift of his zero-COVID policy, which would be tantamount to admitting an error. Questions about why the government did not use the past two years to prepare better for an inevitable reopening will also undoubtedly surface.
People wearing masks take photos in front of a portrait of Xi Jinping at the Military Museum of the Chinese People's Revolution in Beijing on Oct. 8, ahead of the opening of the 20th Party Congress.
At the forthcoming Party Congress, Xi may give vital clues about the future of China's COVID-19 management strategy. Experts say China may be forced to gradually reopen its economy to avoid social unrest, which in turn might put the party's legitimacy under threat.
"The question about zero COVID has always been on the balance between the political side, because the zero-COVID policy has been so closely personally associated with Xi, versus what we might call the medical or the epidemiological reasons for maintaining the policy," said one Washington-based analyst and a former intelligence officer.
"The reality is that it has always been a balance between the two. So sometimes the politics take precedence and sometimes the science or medicine may take precedence. But they will have to converge before that policy will be changed."
"The historical achievement"
This year, in the lead-up to the 20th Party Congress, China has been forced to lock down city after city at a drastically high economic and social cost, culminating in the lockdown of Shanghai, China's largest city and economic hub, from March to June.
An area of Shanghai remains sealed off in July to prevent the virus from spreading. © Reuters
In the Nikkei COVID-19 Recovery Index, designed by Nikkei Asia to rank 121 countries according to their COVID-19 strategies -- measured by case numbers, vaccination rates, mobility and functioning economic life -- China's ranking has fallen precipitously throughout 2022. From No. 1 in the index in July 2021, when many other countries were struggling to contain the damage brought by the delta variant, China fell to below 90th in spring this year, during the two months Shanghai was locked down.
Early in September, after an earthquake struck the western city of Chengdu, which was under partial lockdown, panicked residents attempted to evacuate their apartment complex in an effort to find refuge but were stopped by a barred iron gate. "Did the building fall down? Has it fallen? I ask you, did it fall down?" A guard on the other side of the gate yelled through a loudspeaker, preventing the crowd from leaving the complex.
As the party congress approaches, China's COVID-19 prevention method is becoming more arbitrary: live fish and crabs were tested for the coronavirus in Xiamen; millions were ordered to queue up for COVID-19 testing in Chongqing when wildfires were striking the city; authorities in Yongji, Shanxi province, locked down the city despite there being zero positive cases, and a county in Henan province initiated a 50,000 yuan ($7,050) reward for reporting one positive case.
"The pandemic campaign has, to some extent, been turned into a loyalty campaign," said Willy Lam, a senior fellow at the Washington-based Jamestown Foundation. "That means officials in the regions have gone out of their way to implement the COVID policy just to curry favor with Xi Jinping."
With the appearance of the highly transmissible omicron variant at the beginning of the year, China has been regularly testing its 1.4 billion people, who now need to present a negative result from no more than 48 hours earlier -- 24 in some cases -- to enter most places.
Smoke and flames rise into the sky from a forest fire triggered by persistent drought and heat waves on Aug. 21, in Chongqing, China. © Getty Images
"It's pointless to do mass testing when there is no outbreak," said Jin from the University of Hong Kong. "It's like asking women who have no likelihood of being pregnant to take a pregnancy test every day."
Xi himself has repeatedly reaffirmed his commitment to the zero-COVID strategy and vowed to "resolutely fight against all distortions, doubts and denials" of the country's COVID-19 prevention policy.
In the past three years, China's propaganda machine has been exploiting the country's "great achievements" in containing the coronavirus, gloating over chaos and mass death in the West, while exaggerating the side effects of Pfizer's vaccines, which have proved to be more effective than those developed in China.
Public debate of the fatality of COVID-19 in China is not allowed, either. Anyone arguing that new mutations of the virus are less lethal is regarded as disloyal. A report by Huatai Securities arguing that the omicron variant is no more dangerous than the flu was soon blocked online in China, as was a report by the Beijing-based Anbound Research Center calling for the country to adjust its zero-COVID policy. Anbound's social media accounts were also suspended for two months.
Deng Yuwen, a former editor of Study Times, the official newspaper of China's Central Party School, said he believes Xi will call the zero-COVID policy a historical achievement at the upcoming party congress, arguing it has saved many lives. But, quietly, the Chinese government may gradually ease the draconian control measures.
A medical worker gives a COVID-19 vaccine shot to a child at a hospital in Chongqing, China, in November 2021. One observer says China's refusal to import more effective mRNA shots "is due to vaccine nationalism." © Reuters
"China will never publicly admit that the zero-COVID strategy is over, but they may gradually open up because the impacts on the economy are already too severe," said Deng, who now lives in the U.S. If the World Health Organization announces the pandemic is over next year, Deng added, China will be in an even more awkward position.
Ahead of a potential reopening, the most important thing for China to do now is to "stop demonizing the coronavirus," Jin from the University of Hong Kong said, adding that fooling the public through instilling panic will cause more mental harm than the virus itself.
There has been speculation that China will significantly ease its draconian measures soon after the party congress, but researchers at Goldman Sachs and Nomura investment banks predicted in September and October that China is unlikely to take significant steps toward reopening before the second quarter of next year. An expected government reshuffle in March that traditionally follows a party congress -- another traditionally sensitive time for the party -- is likely to delay the decision.
In its biggest shift to date, China in late June eased cross-border quarantine requirements, shortening the quarantine period for inbound travelers to seven days plus a three-day home quarantine. This is down from the previous 14-day centralized quarantine and seven-day home quarantine, though many local governments were implementing 28-day mandatory quarantines. The State Council, China's cabinet, also issued directives forbidding local governments from arbitrarily extending the quarantine period.
Passengers arrive at Beijing Capital International Airport in June. China recently reduced the quarantine period for overseas arrivals to seven days in a government-run facility, then another three days at home. © EPA/Jiji
A further signal that an opening may be in the cards comes from Hong Kong, where the government recently lifted compulsory quarantine requirements for inbound travelers from overseas. This is seen by some analysts as a bellwether that China might follow. But others disagree. Ting Lu, chief China economist at Nomura, said the move is limited to Hong Kong and does not indicate that China is set to ditch its zero-COVID strategy over the coming months.
"For mainland China," he said, "losing Hong Kong's global financial center status would be too costly, as a closed mainland needs an open Hong Kong more than before. In fact, Hong Kong's reopening has already been quite slow relative to other major global financial centers, risking Hong Kong's status as a global financial center."
The COVID-exit dilemma
Unlike many other countries that prioritized vaccinating older adults due to their increased vulnerability to COVID-19, China initially only vaccinated people aged between 18 and 59 in high-risk jobs. Although the country in March 2021 did include the elderly in the vaccination program, vaccination rates among the elderly remain lower than in many other countries. As of July 23, only 38.4% of Chinese aged 80 and older and 69.9% of those in their 70s had received their third jab.
China's official explanation for the delay in vaccinating the elderly was that there was insufficient data from clinical trials and that the risk of infection in mainland China was low in 2020 and 2021.
Experts say this was a colossal error, and China needs to increase the vaccination rate of the elderly as soon as possible and increase hospital capacities to cope with the consequences of mass infection.
"China made a mistake at the very beginning in not prioritizing vaccinating the elderly," Jin from the University of Hong Kong said. "The country has great execution, they test the elderly all the time, why cannot they vaccinate them the same way now?"
Chinese authorities are now urging the elderly to get vaccinated, using characteristically authoritarian methods. In Shanghai, local authorities in June set vaccination targets for each front-line doctor, promising fines for those that fail to meet their targets. "So we can only try to convince our relatives and some of our patients to get vaccinated," a doctor in Shanghai told Nikkei Asia.
"One reason the authorities didn't forcibly vaccinate the elderly like the mass testing is ... people with preexisting conditions may die [after vaccination], even if it's not connected to the vaccinations, and their family members will link the death to the vaccination, which may lead to social unrest if the death toll reaches a certain level," the doctor said.
In a paper published in National Science Review in April, China's top epidemiologist Zhong Nanshan and co-author Guan Weijie argued that a prolonged zero-COVID strategy is not sustainable and China needs to reopen so as to normalize socio-economic development and adapt to the global reopening.
The poster in the background is encouraging elderly people to get vaccinated, in Beijing, China, on March 30. © Reuters
The paper said that, for an orderly and effective reopening, China should improve its nationwide vaccination rate to above 83%, and vaccination among seniors above 80 particularly needs to be enhanced. China should also collaborate with other countries in developing targeted medications rather than conducting Phase 3 studies in mainland China due to limited patient resources.
Most of the Chinese public is vaccinated with inactivated vaccines from Sinovac and the state-owned Sinopharm, but homegrown vaccines were proved to be less effective than mRNA vaccines that target the virus's spike protein, according to a study by the University of Hong Kong. China has not approved any mRNA vaccines.
"China's refusal to import mRNA vaccines is due to vaccine nationalism," said Deng, the former editor of the Study Times. "Importing vaccines suggests that homemade vaccines do not perform effectively. It will be difficult for China to justify the success of its own vaccinations, especially considering that Beijing has given away so many vaccines to third-world countries and has been undermining the efficacy of Western vaccines."
A model led by Yu Hongjie, a professor in the School of Public Health of Fudan University, published in Nature Medicine in May, argued that, based on China's immunity level as of March, reopening the border would lead to 1.55 million deaths within six months, with 74.7% estimated to occur among unvaccinated individuals over 60.
Given the low capacity of China's health care system, a mass infection episode following a reopening would cause a massive shortage of hospital beds. China has around 3.6 intensive care unit beds per 100,000 people -- far lower than the 34.7 per 100,000 people in the U.S. The paper led by Yu estimated that the peak demand for ICU in China would be 1.7 times to 14.8 times the maximum capacity and projected the period of ICU bed shortages to last for 19 to 48 days if China opened its borders and gave up its strict COVID prevention measures.
In China, infectious diseases like COVID-19 can only be treated at designated hospitals. Among China's 36,570 hospitals nationwide, only about 800 were designated hospitals for COVID-19 by the end of last year, according to the National Health Commission.
Last year, Beijing announced plans to expand two of the infectious disease hospitals, with 1,000 beds to be added in one. Since 2020, Shanghai, Qingdao, Kunming and dozens of other cities have also announced plans to expand the number of their infectious disease hospitals.
Some experts are optimistic. Jin from the University of Hong Kong said the situation has changed a lot since March, when the Fudan University study was conducted, and that it now appears to be almost impossible that more than 1 million would die if China reopens.
"The Chinese authorities are very concerned about a mass infection," he said. "Their concern is not groundless. But in most Asian countries and regions, including Hong Kong and Taiwan, the death rate of COVID-19 is already lower than seasonal influenza. It is impossible to eliminate the coronavirus because it keeps mutating and the ultimate goal of the mutation is to coexist with humans."
Patients and their relatives overflow into the hallway of the emergency zone at Zhongshan Hospital in Shanghai, China, in May. © AP
In an email to Nikkei Asia on Oct. 11, the Economist Intelligence Unit did not rule out the possibility of a large-scale outbreak running out of control in 2023, resulting in 471,000 deaths. "The outcome may arise as a result of popular discontent, fatigue among disease control workers and strained public finances, which weakens the effectiveness of controls," said EIU analyst Chim Lee. "This scenario will eventually enable authorities to manage the coronavirus with greater flexibility, but before that, there will be a period of socioeconomic turbulence in a way that erodes the legitimacy of the ruling Chinese Communist Party."
Struggling local governments
The main case for reopening is economic. China's growth had already started to slow before the pandemic, due mainly to a debt overhang, mostly in the overheated property market. The bursting of the property market bubble, with the bankruptcy last year of China Evergrande Group, has now spread to local government finances and the broader economy. But it will be impossible to address as long as the draconian COVID-19 prevention measures remain in place, economists say.
"If the country still refuses to open up, we will all be screwed up. All the top real estate developers in our city are on the brink of bankruptcy, we expect things to turn a little bit better after opening up," a government official from one of the richest cities of the eastern Jiangsu province told Nikkei.
Most dire is the situation for local governments, which must fund the huge testing and tracing bureaucracy to sustain the state's zero-COVID policy. In the first eight months of the year, all cities except Shanghai logged a budget deficit, mainly due to the plunge in government land sales, which fell 28.5% from the same period last year, and was made worse by the COVID-related tax relief policies and the mounting mass testing expenditure.
Local governments' debt also soared during the pandemic as lending intensified to support economic recovery. As of June, China's local governments' debt balance -- excluding money borrowed via local government financing vehicles -- reached 34.75 trillion yuan, a 57% increase from the figure in January 2020.
According to the Ministry of Finance, the Chinese government spent 1.4 trillion yuan on health care during the first eight months this year, which covered the expenditure on COVID-19 testing. But the real number could be far higher.
In a city of around 8 million people, one round of mass testing costs around 100 million yuan, a local government official told Nikkei. As more Chinese cities roll out regular PCR testing, Nomura estimates that testing 70% of the population every two days would amount to 8.4% of China's fiscal expenditure.
The aforementioned government official from Jiangsu province said the city's leaders had warned in a cross-department internal meeting in late August that the fiscal situation was "extremely serious" this year, as its up-to-date land sales, the biggest part of governments' fiscal revenue, were only about 30% of the same period last year.
"Almost all the departments were asked to rework their fiscal budgets for next year, and we were all asked to return the money that we haven't spent as well as those we won't spend this year, which has never happened before," said the official, who attended the meeting but asked not to be named.
People line up for PCR testing in Chongqing, China, on Aug. 27. China's COVID prevention method is becoming more arbitrary: Even live fish and crabs are being tested. © EPA/Jiji
Even if zero COVID-19 leads to mass business closures and high unemployment, the chances of social unrest are low, Deng said, but if the impact keeps expanding, to local governments, for example, localities might be forced to cut spending on health care, and the threat to social stability would grow.
As fiscal pressure mounts, civil servants in some localities have had their pay cut or been laid off.
Local governments may issue more special debt and bonds -- which are subject to an annual quota -- to fund infrastructure projects, cut more expenditures and levy more administrative penalties on private companies to cope with the fiscal strain, according to Shuang Ding, chief economist for greater China at Standard Chartered Bank.
"The problem now is that if China doesn't reopen," he said, "stimulus alone will not help to boost its economy.
"The impact of the tax cuts on the fiscal revenues should be one time, which will not cause long-term impact, but the local governments' land sale revenue will certainly not grow as fast as before."
Will next year be too late?
Nomura is projecting China's economy to grow 2.7% this year, while Fitch Ratings forecasts 2.8%, far below the official target of around 5.5%.
According to a member survey conducted in June by the U.S.-China Business Council, optimism about the future business outlook in China was at a record low, with China's COVID-19 containment strategy considered the top challenge. In addition, 96% of the respondents said they had been negatively impacted by China's control measures, with more than 50% saying their investment plans had been paused, delayed or canceled.
"It is unclear if this pause in future capacity growth is another temporary blip or one point in a longer trend," said Craig Allen, president of the council. "We certainly see the Chinese government taking steps to prevent a repeat of the Shanghai lockdowns, but the current strategy still leaves a significant amount of uncertainty."
A monument in Beijing's Tiananmen Square marks the fast-approaching opening of China's 20th Party Congress, where Xi may give vital clues about the future of China's COVID management strategy.
The findings were echoed by a report released in September by the European Union Chamber of Commerce in China. Before China's lockdowns earlier this year, some European companies were looking into increasingly onshoring supply chains into China. But since the lockdowns, more and more companies have started to explore options that can provide more supply chain resilience, the report said.
Kung Chan, founder of think tank Anbound, also expressed pessimism about China's economic fate. "Due to fundamental damage, China's economy is no longer likely to rebound as quickly as many believe," he said.
"It is normal for China's economy to go slower, but I am afraid that few people would expect the growth to be below 5%. The biggest reason is the COVID-19 control measures, but not COVID-19 itself."
