On Thursday, China declared a record-high number of COVID-19 infections, and cities around the country have instituted localized lockdowns and other restrictions, which are concerning for the outlook of the world’s second-largest economy.
The surge in the number of infections, which is at record highs not seen since an epidemic in Shanghai earlier this year, has dashed investors’ hopes that China will soon relax the tight zero-COVID policy that, along with a collapse in the real estate market, is battering the economy.
The constraints have also had an influence on output at enterprises, most notably the world’s largest iPhone manufacturing, which has been shaken by violent clashes between workers and security personnel in a rare display of dissent.
According to Nomura analysts, “reopening is still expected to be a lengthy process with high expenses.” The firm reduced its full-year growth forecast from 2.9% to 2.8%, and its fourth-quarter GDP forecast from 2.8% to 2.4% year on year.
The Chinese government has defended the zero-COVID policy, which imposes some of the strictest restrictions in the world, stating that it is necessary to save lives and keep the medical system from being overcrowded.
According to official media, the cabinet acknowledged the economic pressures and emphasized that China would employ timely reductions in bank cash reserves as well as other monetary policy tools to maintain enough liquidity. This could be an indication that the reserve requirement ratio (RRR) will be cut soon.
On Wednesday, China logged 31,444 new local COVID cases, breaking the previous high of April 13, when Shanghai was placed under a two-month lockdown.
On Thursday, China’s shares fell as concerns about the country’s record-high caseload outweighed the positive benefits of new economic stimulus.
Although official infection rates are low by global standards, China seeks to break every chain of transmission, making it a global exception under President Xi Jinping’s hallmark campaign.
China has recently begun to lift some limitations on mass testing and quarantine, seeking to avoid utilizing blanket solutions such as the lockdown imposed on Shanghai’s 25 million citizens.
Cities have begun to use lockdowns more regularly, and frequently without warning. Many individuals in Beijing, for example, claimed to have lately received letters from their housing complexes informing them of three-day lockdowns.
According to Nomura analysts, more than one-fifth of China’s total GDP, or a sum higher than the size of the British economy, is supposedly under lockdown.
Full lockdowns like those seen in Shanghai could be avoided, but as the number of COVID incidents rises, more regular partial lockdowns, according to Nomura analysts, may take their place in an increasing number of cities. The bank also reduced its 4.3% GDP growth forecast for the coming year to 4.0%.
Zhengzhou, where employees at the massive Foxconn facility that manufactures iPhones for Apple protested, announced five days of mass testing in eight of its districts. As a result, Zhengzhou is the most recent city to resume daily examinations for its millions of residents.