Beijing teeters on the brink of Covid lockdown

The coronavirus pandemic is creeping closer to the halls of power in Beijing as authorities race to avert an uncontrolled Shanghai-style outbreak of Omicron in the Chinese capital.

Beijing is tightening coronavirus restrictions after reporting 41 cases on Sunday. Officials in the city of 22 million, which is also home to top leaders of China’s ruling Communist Party, are imposing more restrictions, including closing gyms and cinemas and increasing Covid-19 testing requirements, as they try to avoid joining tens of millions of people confined to their Shanghai apartments.

The new wave of social and health checks in Beijing marked the latest sign that Chinese leaders remained committed to the brutal implementation of President Xi Jinping’s zero Covid policy. This is despite indications that the policy is causing widespread economic damage within and beyond China’s borders while stirring up domestic opposition to the government’s handling of the pandemic.

Beijing authorities ordered three rounds of PCR tests across the city last week after a cluster of cases was discovered in the Chaoyang business district. The daily number of cases in the capital has remained in double digits for the past seven days.

Residents returning to schools and offices on Thursday after this week’s three-day public holiday will be required to show a negative Covid test taken within 48 hours. Indoor dining has been banned during the holidays in a bid to slow the outbreak.

The ramping up of controls in Beijing follows small-scale protests that erupted in Shanghai amid food shortages, as well as online complaints about Xi’s policies.

After weeks of lockdown in some regions hit hard during the first wave of Omicron, including Shanghai, Jilin and Zhejiang, the number of official cases is falling.

But even as life in cities shows nascent signs of revival, the vital logistics routes that connect buyers and suppliers remain strangled. Chinese authorities have also limited traffic between cities to prevent the importation of infections, leaving factories without crucial components needed for manufacturing.

Official economic data released on Saturday showed manufacturing and services activity was at its lowest level since the pandemic erupted from central China’s Wuhan in early 2020.

China’s non-manufacturing purchasing managers’ index, comprising the services and construction sectors, fell to 41.9 in April, deteriorating from 48.4 the previous month and well below the 50 threshold. points which indicates an expansion rather than a contraction.

The manufacturing PMI, a crucial indicator of factory activity in the world’s most important engine of growth, fell to 47.4 from 49.5 in March, according to data from the National Bureau of Statistics.

The data highlighted how weak consumer sentiment and immense supply disruptions were hitting the world’s second-largest economy.

Mounting pressures are already eroding confidence in Beijing’s ambitions to hit 5.5% growth this year – its lowest target in 30 years – while forcing China into a series of stimulus measures and weakening the renminbi.

Economists have warned that the economic shock from the latest lockdowns could be worse than the fallout from the outbreak in Wuhan two years ago. Indeed, many high-tech and automakers are located in and around Shanghai, which faced restrictions for several weeks during a usually busy time for factories in the country.

Wang Zhe, senior economist at Caixin Insight Group, also noted growing distress in China’s labor market and inflation, compounding problems for economic planners in Beijing.

“Some companies said demand was weak due to the Covid outbreaks, and some said the main issue was difficulty getting workers back to work,” Wang said. “Employment has fallen in eight of the past nine months, including April.”

Additional reporting by Andy Lin in Hong Kong

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