Connect with us


China’s Draconian Lockdown Policies: Major Consequences to Follow

While most of the world lifted covid-19 restrictions and learned how to live with the virus, China moved in the opposite direction and doubled down on…



While most of the world lifted covid-19 restrictions and learned how to live with the virus, China moved in the opposite direction and doubled down on its zero-covid policy. Other countries, such as Australia and New Zealand, gave up on similar medical strategies when faced with the more contagious omicron variant and the negative social and economic impact of lockdowns.

Yet Xi Jinping and the Chinese Communist Party (CCP) show no intention of abandoning the flawed zero-covid strategy in order to reinforce the propagandistic argument that China has succeeded in controlling the pandemic, whereas the West has failed. This narrative fits very well Xi's political agenda who seeks to get reelected for a third mandate in November, but it comes at an exorbitant social and economic cost.

Politicized and Flawed Health Strategy

After the initial accusations that it covered up the emergence of the virus at the beginning of the pandemic, China was widely praised for having done an effective job in containing the disease. But this was achieved with a zero-covid strategy based on brutal lockdowns and mass testing of entire towns or regions, even when only a handful of cases were detected.

In parallel, Beijing drastically curtailed and controlled international travel via lengthy quarantines and introduced mandatory mass vaccination. For a while, this policy seemed to work well, as China (officially) recorded a very low number of cases and deaths relative to the West (figures 1 and 2). It was also the only major economy to avoid an economic recession in 2020, and the economy grew strongly in 2021 by taking advantage of robust external demand for consumer goods and global growth stimuli. 

Figure 1: Confirmed covid-19 cases

Source: Our World in Data.

Figure 2: Confirmed covid-19 deaths

Source: Our World in Data.

The arrival of the more contagious but less lethal omicron variant prompted Western countries to abandon the vast majority of covid-19 restrictions, reopen economies, and resume free international travel in spring 2022. At the same time, China stayed its course and reintroduced full or partial lockdowns in more than forty-five cities, including Shanghai, Beijing, and Hong-Kong, which combined account for 40 percent of China's gross domestic product (GDP) and are home to 370 million people.

Shanghai, for example, was forced into a full and savage lockdown for more than two months. More than twenty-five million people were not allowed to leave their homes and suffered from severe shortages of food, medical supplies, and basic necessities, leading to serious tensions with the authorities. Even since the lockdowns in Shanghai and other places ended, China has continued building hundreds of thousands of permanent coronavirus testing facilities in order to be able to test a city's entire population within twenty-four hours. It has also multiplied quarantine centers across the country, showing its commitment to the zero-covid policy.

Western media criticized the severity of the lockdowns but also blamed China's medical woes on its low vaccination rate among the elderly and the alleged inefficiency of Chinese vaccines. This seems hypocritical when 85 percent of the people aged sixty to eighty are double vaccinated and only people over eighty have lower vaccination rates, and it hardly makes a case for locking up entire cities, including young people.

Moreover, all vaccines are "leaky"—i.e., unable to prevent infection and transmission—and a resurgence in covid-19 cases has also taken place in Western countries with high vaccination rates, such as Portugal. Therefore, a more likely culprit for China's current challenge is precisely its zero-covid policy, which has prevented the building up of a meaningful mass immunity during the past two years. Typical of all government interventions, China's protectionist medical stance has not solved the pandemic, but has only kicked the can down the road.

This is now preventing the gradual return to a normal social and economic life. As Australia has illustrated (figures 1 and 2), removing restrictions after a prolonged zero-covid policy period takes an unavoidable medical toll in terms of increased cases and deaths. This can be mitigated by protecting the elderly and the most vulnerable with social distancing measures and effective early medical treatment. But reintroducing lockdowns is clearly not the solution. Scientific evidence after two years of pandemic shows that the zero-covid policy's costs largely exceeded its alleged health benefits.

The benefits were exaggerated by ignoring the behavioral adjustment that individuals make voluntarily to protect their health and well-being. A meta-analysis performed by Professors Jonas Herby, Lars Jonung, and Steve Hanke found that lockdowns had no noticeable effects on covid-19 mortality, concluding that given their enormous economic and social costs "lockdown policies are ill-founded and should be rejected as a pandemic policy instrument."

A Severe Economic Impact for China and the World

Sweeping covid-19 lockdowns seriously hampered economic activity and undermined China's capacity to function as the world's supply chain hub. China's retail sales contracted sharply, by more than 20 percent, from March to May 2022, and industrial production dropped by 3 percent in April and barely grew in May. A report by Bloomberg Economics projects real GDP growth to drop to 2.0 percent this year, well below the official target of about 5.5 percent.

This would allow US growth to outpace China's for the first time since 1976, unless the USA is already headed toward a recession, following the Fed's monetary policy tightening. The World Bank is less pessimistic and has reduced its growth forecast for China by 80 basis points, to 4.3 percent, in 2022. At the same time, the World Bank believes that supply chain disruptions originating from China and the war in Ukraine are increasing stagflation risks, and has cut the global economic growth forecast from 5.7 percent in 2021 to 2.9 percent this year. The weakness of Chinese output exacerbates the global surge in inflation, which may push Joe Biden to lift some of the trade tariffs erected by Donald Trump.

But a tariff rollback may be the only positive economic consequence of China's zero-covid policy. Faced with an economic slowdown that is further weaken China's ailing property market, the Chinese government has rolled out additional measures to stimulate growth, such as tax rebates and financial guarantees to businesses. The People's Bank of China has cut the reserve requirement and the benchmark rate for mortgage lending, and has urged banks to boost lending to support the economy, in particular to small and medium-sized enterprises, green projects, technological innovation, and infrastructure. This policy is increasing China's already high debt ratio, fueling more malinvestment in real estate and infrastructure, and further undermining China's longer-term prospects for balanced growth and steady capital accumulation.

Even more worrying, Beijing's zero-covid policy is threatening foreign direct investment (FDI), one of China's major growth engines. Foreign investment facilitates capital accumulation and transfer of technology and know-how. Significant amounts of FDI have helped China develop its export manufacturing industries and accelerate productivity growth. In recent years, despite being targeted by the trade and tech wars, China has challenged the US's position as the largest recipient of FDI in the world (figure 3).

Figure 3: Top 10 FDI recipients (billions of USD)

Source: OECD International Direct Investment Statistics database.

However, in terms of accumulated FDI stock per capita, China could do much better. Although it outperforms India, for example, China trails other emerging economies, such as Brazil and Poland (figure 4). These countries' relative per capita GDPs (figure 5) reflect this, and suggest that China should attract more FDI if it wants to catch up with the West faster.

And yet draconian movement controls throughout the pandemic made it extremely difficult for foreign companies to make use of the local workforce. Even middle-class professionals are contemplating leaving big cities and China now. The sudden shutdown of factories and logistics networks has made business planning almost impossible and has multinationals' lowered revenues, seriously damaging foreign businesses' confidence in China.

Figure 4: Inward FDI stock (USD per capita)

Source: World Bank.


Figure 5: GDP per capita in PPP (current USD)

Source: World Bank.

A majority of foreign investors have identified the country's zero-covid controls as among the leading impediments to doing business in China. A survey published by the European chamber of commerce in China in May revealed that 78 percent of businesses considered China less attractive for investment because of its more stringent covid-19 restrictions. Covid-related travel restrictions negatively impacted 73 percent of respondents, a large number of whom still have foreign experts stranded outside of the country who are simply giving up on returning to China.

Supply chains have also been disrupted, with 92 percent of companies impacted by China's port closures, road freight decrease, and spiraling sea freight costs. Overall, 23 percent of respondents are now considering shifting their investments out of China to other markets—the highest proportion in a decade. To these problems is added the increasingly politicized and unpredictable business environment, reported by 50 percent of respondents to another survey, released in June.


China's callous and inefficient zero-covid strategy is just the latest example of how policies that prioritize top-down political interventions over market solutions that respect individual freedom fail. China could likely take advantage of the spread of the much lighter omicron variant to lift covid-19 restrictions and close the immunity gap with the rest of the world. Instead, it tries to completely suppress the virus via brutal lockdowns that only postpone the inevitable at a huge social and economic cost. Faced with rising challenges in terms of deglobalization, the ongoing trade and tech wars, and a debilitated real estate sector, China would be better served by market-oriented policies that favor rather than discourage domestic and foreign investment.

Read More

Continue Reading


Costco Tells Americans the Truth About Inflation and Price Increases

The warehouse club has seen some troubling trends but it’s also trumpeting something positive that most retailers wouldn’t share.



Costco has been a refuge for customers during both the pandemic and during the period when supply chain and inflation issues have driven prices higher. In the worst days of the covid pandemic, the membership-based warehouse club not only had the key household items people needed, it also kept selling them at fair prices.

With inflation -- no matter what the reason for it -- Costco  (COST) - Get Free Report worked aggressively to keep prices down. During that period (and really always) CFO Richard Galanti talked about how his company leaned on vendors to provide better prices while sometimes also eating some of the increase rather than passing it onto customers.

DON'T MISS: Why You May Not Want to Fly Southwest Airlines

That wasn't an altruistic move. Costco plays the long game, and it focuses on doing whatever is needed to keep its members happy in order to keep them renewing their memberships.

It's a model that has worked spectacularly well, according to Galanti.

"In terms of renewal rates, at third quarter end, our US and Canada renewal rate was 92.6%, and our worldwide rate came in at 90.5%. These figures are the same all-time high renewal rates that were achieved in the second quarter, just 12 weeks ago here," he said during the company's third-quarter earnings call.

Galanti, however, did report some news that suggests that significant problems remain in the economy.

Costco has done an incredibly good job at holding onto members.

Image source: Xinhua/Ting Shen via Getty Images

Costco Does See Some Economic Weakness

When people worry about the economy, they sometimes trade down when it comes to retailers. Walmart executives (WMT) - Get Free Report, for example, have talked about seeing more customers that earn six figures shopping in their stores.

Costco has always had a diverse customer base, but one weakness in its business may be a warning sign for its rivals like Target (TGT) - Get Free Report, Best Buy (BBY) - Get Free Report, and Amazon (AMZN) - Get Free Report. Galanti broke down some of the numbers during the call.

"Traffic or shopping frequency remains pretty good, increasing 4.8% worldwide and 3.5% in the U.S. during the quarter," he shared.

People shopped more, but they were also spending less, according to the CFO.

"Our average daily transaction or ticket was down 4.2% worldwide and down 3.5% in the U.S., impacted, in large part, from weakness in bigger-ticket nonfood discretionary items," he shared.

Now, not buying a new TV, jewelry, or other big-ticket items could just be a sign that consumers are being cautious. But, if they're not buying those items at Costco (generally the lowest-cost option) that does not bode well for other retailers.

Galanti laid out the numbers as well as how they broke down between digital and warehouse.

"You saw in the release that e-commerce was a minus 10% sales decline on a comp basis," he said. "As I discussed on our second quarter call and in our monthly sales recordings, in Q3, big-ticket discretionary departments, notably majors, home furnishings, small electrics, jewelry, and hardware, were down about 20% in e-com and made up 55% of e-com sales. These same departments were down about 17% in warehouse, but they only make up 8% in warehouse sales."

Costco's CFO Also Had Good News For Shoppers

Galanti has been very open about sharing information about the prices Costco has seen from vendors. He has shared in the past, for example, that the chain does not pass on gas price increases as fast as they happen nor does it lower prices as quick as they sometimes fall.

In the most recent call, he shared some very good news on inflation (that also puts pressure on Target, Walmart, and Amazon to lower prices).

"A few comments on inflation. Inflation continues to abate somewhat. If you go back a year ago to the fourth quarter of '22 last summer, we had estimated that year-over-year inflation at the time was up 8%. And by Q1 and Q2, it was down to 6% and 7% and then 5% and 6%," he shared. "In this quarter, we're estimating the year-over-year inflation in the 3% to 4% range."

The CFO also explained that he sees prices dropping on some very key consumer staples.

"We continue to see improvements in many items, notably food items like nuts, eggs and meat, as well as items that include, as part of their components, commodities like steel and resins on the nonfood side," he added.


Read More

Continue Reading


Under Pressure From Fat Activists, NYC Bans Weight Discrimination

Under Pressure From Fat Activists, NYC Bans Weight Discrimination

Discriminating against fat people is now illegal in New York City, after…



Under Pressure From Fat Activists, NYC Bans Weight Discrimination

Discriminating against fat people is now illegal in New York City, after Mayor Eric Adams on Friday signed off on a ban that will affect not only employment, but also housing and access to public accommodations -- a term that encompasses most businesses. 

We're in safe company using the word "fat," as champions of the cause refer to themselves as "fat activists." With the mayor's signature, two more categories -- both weight and height -- are added to New York City's list of protected personal attributes, which already included race, gender, age, religion and sexual orientation. 

As Mayor Adams signs the law, self-described (and everyone else-described) fat activist Tigress Osborn consumes more than her share of the backdrop (James Messerschmidt for NY Post)

Embracing one of 2023's innumerable strains of Orwellian brainwashing, Adams declared, "Science has shown that body type is not a connection to if you’re healthy or unhealthy. I think that’s a misnomer that we’re really dispelling.”

Even the Centers for Disease Control and Prevention say obesity is an invitation to a host of maladies, including to high blood pressure Type 2 diabetes, coronary heart disease, stroke, gall bladder disease, many types of cancer, mental illness and difficulty with physical functioning. 

“Size discrimination is a social justice issue and a public health threat," said Councilmember Shaun Abreu, who introduced the measure. "People with different body types are denied access to job opportunities and equal wages — and they have had no legal recourse to contest it," said Abreu. "Worse yet, millions are taught to hate their bodies." 

A full 69% of American adults are overweight or obese, but our woke overlords would have us believe the real "public health threat" is a nice restaurant that doesn't want Two-Ton Tessie working the reception desk, or a landlord who's leary of a 400-pound man breaking a toilet seat or collapsing a porch.  

The enticingly-named Tigress Osborn, who chairs the National Association to Advance Fat Acceptance, said New York's ban "will ripple across the globe" -- perhaps something like what would happen if the hefty Smith College Africana Studies graduate were dropped into a swimming pool.  

Councilmember Shaun Abreu said he gained 40 pounds during the pandemic lockdowns and noticed people treated him differently

The New York Times reports that witnesses who testified as the measure was under consideration included "a student at New York University said that desks in classrooms were too small for her [and] a soprano at the Metropolitan Opera [who] said she had faced body shaming and pressure to develop an eating disorder." 

Some have dared to speak out against the measure. “This is another mandate where enforcement will be primarily through litigation, which imposes a burden on employers, regulators and the courts,” said Kathryn S. Wylde, president of the Partnership for New York City, speaking in April. 

Implicitly putting the weight ordinance in the same category as Brown vs Board of Education, Abrue said, “Today is a monumental advancement for civil rights, size freedom and body positivity and while our laws are only now catching up to our culture, it is a victory that I hope will cause more cities, states and one day the federal government to follow suit.” 

Taking effect in six months, the law has an exemption for employers "needing to consider height or weight in employment decisions" -- but "only where required by federal, state, or local laws or regulations or where the Commission on Human Rights permits such considerations because height or weight may prevent a person from performing essential requirements of a job." 

We pray there's a federal exemption for employers of strippers and lap dancers. 

Think we're joking? We remind you that the chair of the National Association to Advance Fat Acceptance is named "Tigress" -- and this is her Twitter profile banner photo:

via Tigress @iofthetigress
Tyler Durden Sun, 05/28/2023 - 15:30

Read More

Continue Reading


‘Kevin Caved’: McCarthy Savaged Over Debt Ceiling Deal

‘Kevin Caved’: McCarthy Savaged Over Debt Ceiling Deal

Update (1345ET): The hits just keep coming for Speaker Kevin McCarthy, as angry Republicans…



'Kevin Caved': McCarthy Savaged Over Debt Ceiling Deal

Update (1345ET): The hits just keep coming for Speaker Kevin McCarthy, as angry Republicans have been outright rejecting the debt ceiling deal which raises it by roughly $4 trillion for two years, doesn't provide sticking points sought by the GOP.

In short, Kevin caved according to his detractors.

Some Democrats aren't exactly pleased either.

"None of the things in the bill are Democratic priorities," Rep. Jim Himes (D-CT) told Fox News Sunday. "That's not a surprise, given that we're now in the minority. But the obvious point here, and the speaker didn't say this, the reason it may have some traction with some Democrats is that it's a very small bill."

*  *  *

After President Biden and House Speaker Kevin McCarthy (R-CA) struck a Saturday night deal to raise the debt ceiling, several Republicans outright rejected it before it could even be codified into a bill.

Here's what's in it;

  • The deal raises the debt ceiling by roughly $4 trillion for two years, and is consistent with the structure of budget deals struck in 2015, 2018 and 2019 which simultaneously raised the debt limit.
  • According to a GOP one-pager on the deal, it includes a rollback of non-defense discretionary spending to FY2022 levels, while capping topline federal spending to 1% annual growth for six years.
  • After 2025 there are no budget caps, only "non-enforceable appropriations targets."
  • Defense spending would be in-line with what Biden requested in his 2024 budget proposal - roughly $900 billion.
  • The deal fully funds medical care for veterans, including the Toxic Exposure Fund through the bipartisan PACT Act.
  • The agreement increases the age for which food stamp recipients must seek work to be eligible, from 49 to 54, but also includes reforms to expand who is eligible.
  • Claws back "tens of billions" in unspent COVID-19 funds
  • Cuts IRS funding 'without nixing the full $80 billion' approved last year. According to the GOP, the deal will "nix the total FY23 staffing funding request for new IRS agents."
  • The deal includes energy permitting reform demanded by Republicans and Sen. Joe Manchin (D-WV)
  • No new taxes, according to McCarthy.

Here's McCarthy acting like it's not DOA:

Yet, Republicans who demanded deep cuts aren't having it.

"A $4 trillion debt ceiling increase?" tweeted Rep. Andrew Clyde (R-GA). "With virtually none of the key fiscally responsible policies passed in the Limit, Save, Grow Act kept intact?"

"Hard pass. Hold the line."

"Hold the line... No swamp deals," tweeted Rep. Chip Roy (R-TX)

"A $4 TRILLION debt ceiling increase?! That's what the Speaker's negotiators are going to bring back to us?" tweeted Rep. Dan Bishop (R-NC). "Moving the issue of unsustainable debt beyond the presidential election, even though 60% of Americans are with the GOP on it?"

Rep. Keith Self tweeted a letter from 34 fellow House GOP members who are committing to "#HoldTheLine for America" against the deal.

"Nothing like partying like it’s 1996. Good grief," tweeted Russ Vought, President of the Center for Renewing America and former Trump OMB director.

In short:

Tyler Durden Sun, 05/28/2023 - 11:30

Read More

Continue Reading