China’s Covid infections hit record as economic outlook darkens

Published November 25, 2022
Health workers guard the entrance of a residential area under lockdown in Beijing.—AFP
Health workers guard the entrance of a residential area under lockdown in Beijing.—AFP

BEIJING: China reported record high Covid-19 infections on Thursday, with cities nationwide imposing localised lockdowns, mass testing and other curbs that are fuelling frustration and darkening the outlook for the world’s second largest economy.

The resurgence of infections, nearly three years after the pandemic emerged in the central city of Wuhan, casts doubt on investor hopes for China to ease its rigid zero-Covid policy soon, despite recent more targeted measures.

The curbs are taking a toll on locked-down residents as well as output at factories, including the world’s biggest iPhone plant, which has been rocked by clashes between workers and security personnel in a rare show of dissent.

“How many people have the savings to support them if things continually stay halted?” asked a 40-year-old Beijing man surnamed Wang who is a manager at a foreign firm.

“And even if you have money to stay at home everyday, that’s not true living.” The streets of Chaoyang, the capital’s most populous district, have been increasingly empty this week.

Sanlitun, a high-end shopping area, was nearly silent on Thursday but for the whirring of the e-bikes of delivery riders ferrying meals for those working from home.

Brokerage Nomura cut its China GDP forecast for the fourth quarter to 2.4pc year-over-year from 2.8pc, and cut its forecast for full-year growth to 2.8pc from 2.9pc, which is far short of China’s official target of about 5.5pc this year.

“We believe re-opening is still likely to be a prolonged process with high costs,” Nomura wrote, also lowering its China GDP growth forecast for next year to 4.0pc from 4.3pc.

China’s leadership has stuck by zero-Covid, a signature policy of President Xi Jinping, even as much of the world tries to co-exist with the virus, saying it is needed to save lives and prevent the medical system from being overwhelmed.

Acknowledging pressure on the economy, the cabinet said China would use timely cuts in bank cash reserves and other monetary policy tools to ensure sufficient liquidity, state media said on Wednesday, a hint that a cut in the reserve requirement ratio (RRR) may come soon.

China stocks fell on Thursday, as concerns over record-high domestic daily Covid-19 cases overshadowed optimism from fresh economic stimulus, and missing out on a rise in global stocks to two-month highs.

Wednesday’s 31,444 new local Covid-19 infections broke a record set on April 13, when the commercial hub of Shanghai was crippled by a city-wide lockdown of its 25 million residents that would last two months.

This time, however, big outbreaks are numerous and far-flung, with the biggest in the southern city of Guangzhou and southwestern Chongqing, although hundreds of new infections are reported daily in cities such as Chengdu, Jinan, Lanzhou and Xian.

Nomura estimates that more than a fifth of China’s GDP is under lockdown, a share bigger than the British economy.

“Shanghai-style full lockdowns could be avoided, but they might be replaced by more frequent partial lockdowns in a rising number of cities due to surging Covid case numbers,” its analysts wrote.

While official case tallies are low by global standards, China tries to stamp out every infection chain, a tougher challenge as China faces its first winter battling the highly contagious Omicron variant.

Published in Dawn, November 25th, 2022

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