Happy Birthday COVID

Episode Summary

Executive Summary: The episode argues that China’s abrupt exit from zero-COVID, combined with under-vaccination among the elderly and a still-weak property sector, will likely produce a rebound in Chinese growth in 2023—but one that remains economically and politically messy. The hosts also explore how China’s recovery could aid tourism and supply chains while worsening Europe’s energy squeeze, and they caution that COVID and other pandemic risks remain unresolved globally.

Main Topics: China’s zero-COVID policy and its failure under Omicron (Priority: 5/5): Adam Tooze argues zero-COVID worked early on but became untenable against Omicron; the real failure was China’s slow pivot away from suppression and insufficient vaccination of older adults. China’s economic rebound and stimulus tradeoffs (Priority: 5/5): The discussion examines how Beijing is softening its property crackdown and may use real estate stimulus to stabilize growth, even though this risks reinforcing old imbalances. Property crisis, Evergrande, and domestic demand weakness (Priority: 4/5): China’s property sector is described as a major drag on growth, with Evergrande emblematic of broader leverage problems and a youth-unemployment-driven need for quick stimulus. Global spillovers: tourism, supply chains, and commodities (Priority: 4/5): China’s reopening is expected to boost tourism and ease supply-chain bottlenecks, while also pushing up commodity demand and potentially tightening energy markets. China’s changing role in global capital and politics (Priority: 4/5): The episode contrasts falling short-term financial flows and reputational damage with persistent foreign direct investment from multinational firms, especially German industry. The pandemic is not really over (Priority: 5/5): Tooze rejects the idea that COVID is over, citing ongoing outbreaks, new variants, and avian flu as reasons to keep pandemic risk in view as part of a wider ‘polycrisis.’

Key Arguments: Zero-COVID was effective early in the pandemic, but Omicron made social discipline and lockdowns insufficient as a containment strategy. China’s main policy mistake was not just maintaining zero-COVID too long, but failing to rapidly vaccinate the elderly once the virus became too infectious to suppress. The abrupt policy reversal is likely to be followed by growth recovery, but the rebound may rely on reviving property and credit, perpetuating structural problems. Real estate remains central because without stabilization there is no broad consumer recovery; households’ wealth is still tied to property. China’s reopening should help global tourism, especially in Europe and Asia, and reduce supply-chain bottlenecks. A strong Chinese industrial rebound could worsen Europe’s energy situation by increasing Chinese LNG demand. China’s reputation has deteriorated in many Western-aligned countries, but foreign direct investment into China remains strong because firms see structural market opportunities. The pandemic should not be treated as over because global transmission, variants, and animal reservoirs continue to pose serious tail risks.

Data Points: Time since pandemic recognition: 3 years - The episode frames the discussion around the third anniversary of China’s initial COVID disclosure. Over-80s with two jabs plus booster (spring 2022): 20% - Used to illustrate China’s failure to protect the most vulnerable after Omicron. Over-80s with anything like full vaccination cover (current): 40% - Shows progress but still inadequate elderly coverage. Target for over-80s vaccination cover: 90% by end of January - China’s ambitious late catch-up goal. China GDP growth in 2022: 2.7% to 3% - Outside observers’ estimate of China’s worst reform-era performance. China GDP growth forecast for 2023: 4% to 5.5% - Expected rebound after reopening and policy easing. Property sector share of GDP: about 25% - Illustrates how central real estate became to China’s growth model. Youth unemployment rate: around 20% - A reason Beijing may resort to rapid stimulus and construction support. Chinese outbound travelers in 2019: 150 million - Baseline for global tourism before the pandemic. Chinese outbound tourism spending in 2019: over $255 billion - Shows China’s outsized importance to global travel and luxury markets. Drop in Chinese tourism spending in 2022: 95% down - Effect of zero-COVID on outbound travel. Recovery in Chinese tourism by summer 2023: about 50% of pre-crisis levels - Projected rebound in outbound travel. Iron ore price increase since summer 2022: up 50% - Signals improved Chinese industrial demand expectations. Foreign direct investment into China up to August 2022: about $140 billion - Demonstrates continued long-term corporate investment despite geopolitical tension. United States daily new COVID cases (Jan. 10): 67,000 - Used to argue the pandemic remains active in the West too. US test positivity rate (Jan. 10): 15% - Suggested as evidence transmission is still out of control. US COVID deaths per day (Jan. 10): just short of 500 - Shows ongoing mortality despite reduced public attention. US hospitalization increase over two weeks: 17% - Indicates renewed pressure from the XBB.1.5 variant. Avian flu lethality in Hong Kong human cases: 60% to 70% - Historical reference to why avian flu remains a serious tail risk.

Pivotal Quotes: "the most severe and the most shambolic turn in Chinese policy since the beginning of the reform period" — Adam Tooze: Describing the abrupt abandonment of zero-COVID as a historic policy failure. "You can't effectively fight with social distancing" — Adam Tooze: Explaining why Omicron forced China to change strategy. "if there’s one thing this pandemic has taught us, you can't move away from China" — Adam Tooze: On global interconnectedness and the continuing relevance of Chinese outbreaks.

Implications: China’s reopening may lift global growth and tourism, but it also keeps supply-chain, energy, and health risks alive. The episode urges listeners to treat COVID as ongoing, not past, and to expect more volatility in China-linked markets and policy.