Delta variant poses new threat to Chinese economy

The Delta variant poses new risks for the world’s second-biggest economy as it spreads from the coast to China’s inland cities and presents fresh challenges to authorities who have for months managed to avert any widespread outbreak of the coronavirus.

Barely a month after disrupting industry in the southern export hub of Guangdong, cases of the Delta variant were detected in Nanjing, capital of Jiangsu province on the coast. The infections were traced back to a flight from Russia.

Since Nanjing confirmed its first Delta cases on Jul 20, numerous cities in southern China and a few in the north including Beijing have reported infections. The tally of locally transmitted cases stood at 353 as of Sunday (Aug 1).

It was not immediately clear whether Nanjing was the source of all the infections, as some authorities have yet to disclose the outcome of their virus-tracing efforts.

Jiangsu, the province with the second-largest economic output after Guangdong in 2020, is by far the worst-hit, accounting for about 80 per cent of the confirmed cases.

The emergence of the variant, which is more transmissible than the original strain first detected in the city of Wuhan in late 2019, has seen the return of tough counter-epidemic measures.

Policymakers are under pressure to ensure that while populations are protected, economies are not excessively strained. China’s overall economy is not invulnerable. It grew more slowly than expected in April to June, due to persistently high raw material prices, cautious consumer spending and a subdued real estate market.

“The Delta variant is the biggest test of China’s zero-COVID strategy since the initial outbreak last year,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

“But given the country’s track

record in dealing with the virus so far, our assumption is that they will quash the outbreak before it gets

out of control. Of course, doing so will come at some economic cost.”

Yangzhou, near Nanjing, has been battling rising coronavirus cases since last Wednesday. Many factories and logistics firms in the city of 5 million have been shut as employees joined queues of people to get tested, some up to three times a week.

“We cannot deliver goods because the delivery firm informed us that they’ve suspended their services,” said a manager of a toy factory surnamed Wang.

“In the past few days, many places have been gradually locked down. We were officially told to stop operations today, and all our employees didn’t come to the factory.”

Tourism vulnerable

Tourism in some smaller cities could take a hit in August, usually a peak travel season due to the summer school break.

Zhangjiajie, where dramatic stone pillars inspired the Hallelujah Mountains in the 2009 blockbuster “Avatar”, has seen an outbreak, linked to Nanjing, traced to a theatrical performance at a tourist site on July 22.