IMF warns China over cost of Covid lockdowns

theguardian.com:

China, the world’s second largest economy, should review its zero-tolerance approach to the pandemic or risk damaging the global recovery, according to the head of International Monetary Fund.

Kristalina Georgieva said Beijing should reassess the use of lockdowns to limit the spread of the highly contagious Omicron variant since it became clear the harm to human health was less severe than the Delta variant.

Speaking at the World Economic Forum on a virtual panel, she said that while the hardline approach had contained the pandemic in China for “quite some time”, the restrictions were now proving to be a burden on the economy in China and globally.

Millions of people in Henan province were ordered into lockdown earlier this month after China’s national health commission reported 87 new locally transmitted Covid-19 cases.

Other provinces have also been affected by shutdowns in recent weeks, while Hong Kong has banned passengers from 150 destinations from coming to the island.

Georgieva said the slowdown in economic growth in China was due to interruptions caused by Covid-19 lockdowns, which harmed consumer spending.

“China is still using a zero-Covid policy. But what Covid is teaching all of us is that a highly transmissible variant may be much more difficult to contain without a dramatic impact on the economy,” she said.

The IMF boss also chastised the Chinese authorities for withdrawing financial support to protect workers and businesses too early, saying that the economy continued to need subsidies from the government and for the central bank to keep interest rates low.

Earlier this week the People’s Bank of China cut the main mortgage rate. Many analysts in the City believe there could be more rate cuts to follow.

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