By Dan Steinbock
Hoping to boost the economic impact of the festival season, China also seeks to preempt new variant waves. The ultimate goal is to reinforce consumption in a time of new variants, supply disruptions and uncertainty.
In mid-January, the National Development and Reform Commission (NDRC) pledged to boost holiday consumption during the Chinese New Year. Meanwhile, China’s top economic planner has also been promoting the traditional shopping season of the Spring Festival and the Lantern Festival, along with the Valentine’s Day.
Intriguingly, there is a common denominator between the joyful festivals and variant invasions. That denominator is demand – the effort to recover the pre-pandemic demand even amid successive waves of variants and sporadic infection outbreaks.
The festival effects
Around the world retailers aspire to reinforce sales during major holidays, which have a “multiplier effect” on revenue generation. Such efforts boost holiday spending; but the multiplier effect is more extensive, when authorities implement additional policy measures to foster consumption.
With the new COVID-19 flare-ups in several cities, including Omicron infections in Beijing and Tianjin, the NDRC has taken measures to increase holiday spending, in order to boost the economy in the 1st quarter of the year.
During the peak travel season (chunyun) of this year’s 40-day Spring Festival — the world’s largest human migration — people are expected to make some 1.18 billion trips (36 percent increase relative to 2021). About 260 million passenger trips have already been made during the first 10 days of the festival (46 percent more than in 2021). With air travel increasing by more than 40 percent during the seven-day holiday, the holiday season is contributing to the sector’s rebounding. As for offline consumption, it increased 29 percent in Shanghai alone.
The “new post-pandemic normal” is creating challenges worldwide, due to the triple pressure from shrinking demand, supply disruptions and weakening expectations. In December, US retail sales fell, despite the holiday shopping season. Yet, strong sales by Amazon suggested robust ecommerce potential.
In China, too, Spring Festival online sales have shown strong growth, boosted by ice and snow tourism and the Beijing 2022 Winter Olympic Games, particularly by “Gen Z” (born between 1995 and 2009). In effect, early online payment transactions suggest growth of up to 5.3 percent relative to 2021 (11.6 percent in terms of value).
The pandemic effects
When China contained the COVID-19 pandemic in early 2020, the number of total cases worldwide was less than 90,000. Of these, most were in the Chinese mainland. Today, the West’s failure to contain the pandemic has resulted in a whopping 400 million cases worldwide. Yet, in China the cases remain less than 110,000.
Since spring 2021, many advanced economies have witnessed significant progress in vaccinations. By contrast, most emerging markets and developing economies have had a much slower rollout, hampered by lack of supply and export restrictions, due to inadequate international cooperation and vaccine hoarding by rich countries.
A protracted pandemic, due to the failure to deliver vaccines and vaccine hesitancy, may further penalize global GDP by a cumulative $5.3 trillion over the next five years. Worse, economic scarring will constrain medium-term performance. The global economy is projected to grow 4.4 percent in 2022 but the risks remain heavily on the downside as many developing countries are facing a lost 5- to 10 years in missed output.
After containment failures, the West has largely resigned to an “endemic” COVID-19, which is mistakenly portrayed as gradual improvement, lower infections, fewer deaths. In fact, the massive pandemic surges in the West ensure huge population bases for new potential variants. Unlike Omicron, these could prove highly transmissible and more fatal. In that case, recurrent epidemic waves for respiratory transmitted epidemic infections would further penalize the world’s most vulnerable economies.
In September 2021, an UNCTAD report projected that, through 2025, developing countries are likely to be $12 trillion poorer because of the pandemic. The failure to roll out vaccines will knock another $1.5 trillion from incomes across the Global South. Due to new policy failures in the West, these losses are likely to increase.
Poor economies will pay dearly for the rich countries’ policy mistakes.
China’s challenges amid losses in the West
Since the global financial crisis, an astronomical $25 trillion has been pumped into advanced economies, while massive fiscal packages have been supported by ultra-low rates and rounds of quantitative easing (QE).
Soon, the US Federal Reserve could make a dire situation worse by resorting to faster rate hikes and quantitative tightening.
In such an international environment, China’s challenge is to balance efforts at economic rejuvenation with appropriate control measures against existing variants and those that are yet to come. What’s needed is a “people come first” approach, yet one that can reduce supply disruptions and sustain optimal employment.
In the new status quo, global leadership requires multilateral cooperation, diplomacy and development; not unilateral protectionism, conflict and rearmament.
A version of the commentary was published by China Daily on Feb. 14, 2022
About the Author
Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at India, China and America Institute (US), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net/