64 Finance&economics TheEconomistJanuary22nd 2022
more precisely targeted. After Omicron in
fections were discovered in Shanghai, for
example, the authorities raised the “risk”
level (which entails tightened restrictions
on movement) not for the entire city or an
entire district, but for zones as small as a
bubble tea shop, where three workers were
infected. “Zerocovid has maybe 1,000 fac
es in 1,000 cities”, says one analyst, de
pending on the resources each place can
lavish on the strategy.
The more immediate economic threat
posed by Omicron is not to foreign cus
tomers but to China’s own consumers. In
termittent restrictions on travel and gath
erings have hampered retail spending,
which grew by only 1.7% in nominal terms
in December, compared with a year earlier,
and shrank, after adjusting for inflation.
Goldman Sachs, a bank, thinks further
lockdowns this year could cut a full per
centage point off growth in household
consumption. It has lowered its growth
forecast for gdp as a whole from 4.8% to
4.3%, below the government’s target.
China’s recent economic momentum
has also suffered from coal shortages, en
vironmental limits on energy intensity,
regulatory crackdowns on consumerfac
ing tech companies, and strict curbs on
borrowing by property developers, which
forced several to default, shaking the con
fidence of homebuyers. In curling, skaters
frantically sweep debris and other impedi
ments out of the stone’s way to smooth its
passage across the ice. In China, policy
makers have been doing the opposite,
sweeping one regulatory obstacle after an
other into the economy’s path.
What explains this regulatory zeal?
After the economy bounced back quickly
from the first wave of the pandemic, Chi
na’s policymakers may have concluded
that it was a good time to curb some of the
negative sideeffects of growth, such as
pollution and property speculation. Eco
nomic momentum seemed assured. Ex
ports in particular boomed as people
around the world spent less on facetoface
services during the pandemic and more ongoodstokeepthemsafe(masks),slim(ex
ercisebikes)andsane(gamesconsoles).
Butthisexternalsourceofgrowthmay
ebbover2022.Foreignersareunlikelyto
splash out again onthehomecomforts
thatgotthemthroughrecentlockdowns
(seenextstory).Customerswhoboughta
games console or exercise bike in 2021
probablywillnotneedanupgradesoon.
Moreover,forChina’sexportstogrowfrom
their current levels, the splurge would
havetobeincreased,notmerelyrepeated.
Somewhat belatedly, policymakers
havenowrealisedthatgrowthneedsstabi
lising.OnJanuary17thChina’scentralbank
cuttheinterestrateonitsoneyearloans
from2.95%to 2.85%.That wasfollowed
dayslaterbya fallinthereferenceratesfor
bank loans. These reductions follow a cut
last month in the reserve requirements im
posed on banks.
The government is also easing fiscal
policy. It has extended incometax breaks,
including favourable treatment for year
end bonuses. It is encouraging local gov
ernments to issue more “special” bonds
(which are meant to be repaid out of rev
enues from the infrastructure projects
they finance). It is also hastening construc
tion of 102 infrastructure “megaprojects”
outlined in the country’s fiveyear plan for
202125. China’s state grid will, for exam
ple, build 13 ultrahighvoltage transmis
sion lines in 2022. Increased infrastructure
investment could add at least a percentage
point to gdpgrowth in the first half of
2022, according to Morgan Stanley, a bank.
Analysts at Morgan Stanley are relative
ly confident about the government’s
chances of meeting its growth target this
year, as long as policymakers bring about a
soft landing for the property market. Home
sales fell by almost 18% in December, com
pared with a year before. To arrest this
trend, government officials have tried hard
to reassure homebuyers that the flats they
have bought in advance will be built, even
if the developer that sold them goes bust.
Mortgage rates are edging downwards. And
a number of cities have experimented with
subsidies and tax cuts to encourage home
buying. Rosealea Yao of Gavekal Drago
nomics, a consultancy, thinks sales will
improve in the first quarter compared with
the previous three months.
But although China’s national rulers are
now committed to stabilising the econ
omy, they are still wary of overstimulating
property, which is prone to worrying spec
ulative bubbles. Beijing wants local gov
ernments to do enough, but not too much.
After the northern province of Heilong
jiang promised an “allout sprint” to revive
the property market, the exhortation was
soon removed from the internet, points
out Ms Yao. The measuredart of curling,
not sprinting, is thebettermetaphor for
the government’s aims.nIt’s less fun at home
China, % increase on a year earlier*Source:RefinitivDatastream *From March403020100
2021Retailsales
Nominalterms
403020100
2021Exports of goods
$ termsSupplysnarlsChain reactions
T
he generalpublic learned far more
about supply chains last year than it
probably cared to. A host of disruptions to
production and shipping interacted with
soaring demand for goods to produce bare
shelves and rising prices. Although goods
have been in short supply, the number of
measures tracking supplychain woes has
proliferated at an impressive pace in re
cent months. All paint a picture of histori
cally high levels of disruptions, and an un
certain path ahead.
One gauge is an “ocean timeliness indi
cator”, published by Flexport, an American
logistics firm. This reports how long it
takes a shipment to move from the suppli
er’s warehouse to the departure gate of the
destination port, for two big freight routes
out of China: to Europe and America. Three
years ago the journey to Europe took just
under 60 days, and that to America just un
der 50. Travel times then rose steadily after
the pandemic struck. But the trends for the
two routes have diverged a little in recent
months. Shipping times to Europe have
fallen from above 110 days down to 108.
Transport to America, at 114 days’ total
journey time, takes longer than ever (see
chart on next page, lefthand panel).
A global supplychain pressures index,
compiled from a variety of indicators by
economists at the Federal Reserve Bank of
New York, tells much the same story. BeWASHINGTON, DC
Just how gummed up are global
supply chains?Ever delayed