China claims Covid victory in Shanghai despite recession risks  

China has declared victory in defending Shanghai from the coronavirus pandemic, underscoring Beijing’s unrelenting commitment to its zero-Covid strategy despite the economy teetering on the edge of recession and millions remaining under lockdown in parts of the country.

The People’s Daily, the official newspaper of the ruling Chinese Communist party, and other state media heralded the “great achievements . . . made in the defence of Shanghai” and reaffirmed support for the controversial policy of completely eradicating Covid-19.

The claims came as many of the city’s 26mn residents emerged this week after two months of lockdowns in response to a wave of the highly infectious Omicron variant. Daily cases numbers fell to a three-month low of 61 on Wednesday, from a peak of about 30,000 in April.

But economists warned that the costs of the zero-Covid policy would mount, with the widespread construction of testing and quarantine facilities further denting hopes of a swift return to normality.

China is on the edge of entering a recession this quarter for the first time since the start of the pandemic in 2020 and for just the second time in three decades.

Alicia García-Herrero, chief economist for Asia-Pacific at Natixis, warned against expecting a “V-shaped recovery” from the world’s second-biggest economy and biggest consumer market if President Xi Jinping’s anti-Covid policy remains in place.

“People didn’t think this would happen because [the zero-Covid policy] is a crazy idea for a country like China . . . Frankly, as an economist, I thought people by now have learned how costly lockdowns are,” she said.

In response to a surge in Omicron cases in March, sweeping restrictions were placed on about 345mn people and nearly 50 cities were put under full or partial lockdowns, according to Nomura data. As the caseload has eased, the number of people still under lockdown has declined to roughly 133mn in 16 cities, the Japanese bank said.

Official data have revealed broad hits to the Chinese economy across critical indicators for manufacturing and investment, services and consumption, as well as the property sector.

But unofficial mass transportation data showing inter- and intracity mobility pointed to a bleaker outlook, with activity across most Chinese provinces still trailing pre-pandemic levels, according to Natixis data.

“China’s recovery in mobility after the Wuhan shock in February 2020 was much faster than in this occasion,” García-Herrero said, adding “unless you open all of these restrictions, fully, you won’t get back to the mobility you had in 2019”.

Over recent weeks, Beijing has announced a series of stimulus measures in a bid to soften the blow. Chinese premier Li Keqiang, speaking at a meeting on Wednesday of the State Council, China’s cabinet, urged officials to “redouble” their efforts in accelerating the implementation of these policies and removing crippling supply chain bottlenecks.

But the remarks stood in contrast to regular warnings from top officials and state media that any large-scale Covid outbreak would threaten the lives of tens of millions of elderly Chinese, many of whom have not had three vaccine doses, and overwhelm the healthcare system.

Additional reporting by Maiqi Ding in Beijing