China’s zero-Covid policy a burden to domestic and global economy

The International Monetary Fund’s managing director said Friday that China’s zero-Covid policy is increasingly looking like a “burden,” which is impinging economic recovery both domestically and for the world at large.

Speaking to CNBC’s Geoff Cutmore via videoconference at The Davos Agenda virtual event, Kristalina Georgieva said the containment strategy, though initially successful, was now presenting more risks than benefits.

Zero-Covid refers to attempts to completely eliminate the virus via public health measures such as lockdowns, mass testing, and border quarantine.

“The zero-Covid policy, for quite some time, did contain infections in China,” said Georgieva, adding that the new highly transmissible omicron variant meant that these containment measures cannot now be easily achieved.

“The restrictions that need to be imposed are more of a burden to the economy, put more at risk not [for] only China but also China as a supply source for the rest of the world,” she said.

Two years into the pandemic and with the emergence of the omicron variant, Georgieva noted that it is now important for all countries to reassess the best way to deal with the pandemic. In China’s case, it may soon be untenable to contain the latest wave without severe economic implications, she said.

“What omicron is teaching all of us is that a highly transmissible variant of Covid may be much more difficult to contain without a dramatic impact on the economy,” said Georgieva.

Already, China has been moving to boost its economy amid slowing growth. On Wednesday, the country’s central bank, the People’s Bank of China, cut its benchmark lending rates, lowering corporate and household loans.

Georgieva noted that further measures could be expected as a “pandemic policy” remains a top economic policy for China and the rest of the world throughout 2022.

“Unless we build protections around the globe, we are going to continue to see disruptions and the future would not be as bright as we want it to be,” Georgieva said.

On Thursday, China’s mainland health commission reported a total of 73 new confirmed cases. It has a seven-day average of 129 cases.