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China’s economy can no longer withstand zero new coronavirus

N.ot all Businesses have struggled throughout China’s coronavirus-free era. For example, Andon Health, a Shenzhen-listed company that manufactures coronavirus tests and medical devices, saw its net profit increase by 32,000% in the third quarter of this year compared to the same period in 2021. . China and America. The 35 largest companies manufacturing COVID-19 tests will generate about 150 billion yuan ($21 billion) in revenue in the first half of 2022, creating a new generation of pandemic heavyweights.

But outside China’s corona-industrial complex, the economy is suffering. Lockdowns and embarrassing restrictions on movement are hampering consumer confidence and economic growth.Over the past two weeks they have inspired protests across the countrytensions have risen over the weekend. Young people On the streets of Shanghai on November 27, he dismissed the possibility of endless testing and lockdowns, chanting: we want freedom “

The economic impact of China’s attempt to eliminate the virus has never been clearer. Movement of people is severely restricted. During the week of November 14, domestic flights were down 45% year-on-year due to an increase in COVID-19 cases. According to Australian investment bank Macquarie, China’s three biggest airlines have lost his 74 billion yuan in the first nine months of 2022. Box office receipts, a measure of people’s willingness to go out, fell 64%. On November 27, only 42% of his Chinese cinemas were open. Some of the larger cinemas have closed completely.

Lockdowns are currently in place in cities that make up about a quarter of China’s population. gdpThat surpassed the previous peak of about a fifth of what it was in mid-April when Shanghai shut down, according to an index compiled by Japanese investment bank Nomura. China’s youth unemployment rate hit a record high of 19.9% ​​in July. His road freight throughput for the week ending November 25 was 33% below the level of the previous year.

Economic policymakers are looking to revive the economy as coronavirus infections reach unprecedented heights. The central bank has announced a reduction in the required reserve ratio of lenders. Technocrats have sought to breathe new life and confidence into China’s property market, which has seen sales plummet over the past year. The mitigation measures announced in mid-November are intended to give struggling developers the credit they need to continue building. Sentiment is expected to improve slightly over time. However, continued lockdowns and dire consumer confidence will probably put potential homebuyers off buying. And the overall economic outlook for 2023 is getting darker.

At one time, preventing COVID-19 seemed like a good plan. In 2021, life in China seemed almost back to normal as the rest of the world was hit by an unstoppable spread of new variants. Its covid-related deaths are just a fraction of the covid-related deaths suffered elsewhere in the world. China’s covid policy, which began with the lockdown of business hub Shanghai, has seemed utterly chaotic and repressive. Businesses and residential areas can be cracked down without warning. Traveling between cities and states has become cumbersome, with each local government enforcing its own version of COVID-19 restrictions.

Chinese stocks are plunging as rumors of reopening swirl for weeks. On his November 11th, the central government will ease various COVID restrictions, including eliminating the need for secondary contact for quarantine and shortening the quarantine for inbound travelers from his 7 days to 5 days. issued a list of 20 measures aimed at The measure was received by the stock market as a sign that China plans to phase out Corona Zero. However, the Chinese leadership had no intention of sending such a signal. Rather, the mitigation was just a tweak of policy, perhaps intended to make it more tolerable over a longer period of time. As the number of cases rises in many cities, local authorities are returning to widespread and arbitrary lockdowns.

As pressure mounts on many fronts, Beijing’s leaders must contend with the idea that both the virus and the people’s patience will eventually get out of control. The future is uncertain. Few analysts believe China is gearing up for an imminent reopening of its economy. Instead, many believe a period of turmoil and heartbreaking policy failure is just around the corner. For at least the next four months, or until after a key political meeting in March, Beijing’s leaders are expected to try to keep the country virus-free while at the same time improving its methods. The situation could persist into much of his 2023 if central government officials fail to formulate an exit strategy.

Under these circumstances, the economic outlook is grim. City-wide shutdowns could be averted, but businesses, residential areas and even entire districts could remain on lockdown. Local authorities sometimes do this without officially announcing lockdowns to appear to support new easing measures. Many of the current problems facing airlines and film companies will likely continue and spill over to other consumer-facing businesses.

Multinational corporations are expected to continue in turmoil. American consumers who buy new mobile phones can also experience COVID-01. The recent shutdown of factories in China that assemble iPhones has caused serious disruption to Apple. The factory, which employs 200,000 people and is owned by his Taiwanese firm Foxconn, was hit by an outbreak in October that forced a partial lockdown. I ran out of food. Garbage piled up. By early November, many employees had escaped by jumping walls or walking down highways trying to get home.

To solve the labor shortage, officials in Henan province, where the factory is located, have asked low-level Communist Party officials to start staffing production lines while Foxconn tries to recruit more workers. I called. The amount of production will still be small.

Even more chaos could erupt in 2023, when events run amok and authorities are forced to abandon Zero Corona. Many China watchers have been seduced by the prospect of the end of the policy, whether planned or forced. , which is intended to minimize confusion between the two phases. This optimistic outlook fails to explain what could be one of the world’s greatest public health upheavals in recent memory. That is a significant resurgence of cases across a population almost completely accustomed to the virus.

This period could include a widespread slowdown in commercial activity. Both store owners and shoppers may choose to shelter at home. Factories may temporarily shut down as the infection spreads across production floors. Policy turmoil and disagreements between counties, cities and states can disrupt his chain of supply for weeks. Some local officials, who have been trained over the past three years to avoid COVID-19 at all costs, will rely on stealthy lockdowns to curb the spread of the disease. These conditions could last at least a quarter of the time if the viral infection was allowed to progress fairly quickly. Nomura’s Ting Lu said the areas subject to lockdown at this stage could account for his 40% of the world. GDP, Over 1/4 or 1/2 yield.

Analysts at consultancy Capital Economics say even if China ends zero Covid soon, the positive impact on the economy will probably not be felt until 2024. The interim period will make him one of turmoil and instability. Growth is slow and protests are very likely to continue depending on how local authorities implement their COVID-19 measures.

https://www.economist.com/finance-and-economics/2022/11/28/chinas-economy-cannot-bear-much-more-zero-covid China’s economy can no longer withstand zero new coronavirus

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