China reported over 31,000 Covid cases on Thursday – a record high number, as localised lockdowns were imposed in many cities.
The surge in infections, at levels not seen insect the two-month shutdown in Shanghai in April, has darkened the outlook for the world’s second largest economy.
In Beijing, malls and parks were shut and once-bustling areas of the capital were empty after authorities urged people to stay home. The 3.5 million citizens in upscale Chaoyang district have been urged “to not go out the area unless necessary.”
Shanghai also barred recent arrivals from restaurants and other venues, while China’s top auto association said on Wednesday it would cancel the second day of the China Automotive Overseas Development Summit taking place in the city, because of the deteriorating Covid situation.
And in Shenzhen, residents must present a negative test within 48 hours or a record of already taking a Covid test within 24 hours from November 24 (today) to enter airports, railway stations and bus stations.
These moves have killed hopes by investors that China will ease its rigid zero-Covid policy that, along with a downturn in the property market, is battering the economy.
The restrictions have taken a toll on Chinese citizens, who have been increasingly frustrated, while hitting output at factories including the world’s biggest iPhone plant, which has been rocked by violent clashes between workers and security personnel in a rare show of dissent.
Growth Forecasts Cut
“We believe reopening is still likely to be a prolonged process with high costs,” Nomura analysts wrote in a note. The brokerage cut its GDP forecast for the fourth quarter to 2.4% year-over-year from 2.8%, and also cut its forecast for full-year growth to 2.8% from 2.9%.
China’s leadership has stuck by its zero-Covid policy, which includes some of the strictest restrictions in the world, saying it is necessary to save lives and prevent the medical system from being overwhelmed.
However, in an acknowledgement of the pressure on the economy, the cabinet said China would use timely cuts in bank cash reserves and use other monetary policy tools to make sure there is enough liquidity, state media reported on Wednesday.
That appears to be a hint that a cut in the reserve requirement ratio (RRR) may be coming soon.
China recorded 31,444 new local Covid cases for Wednesday, breaking the record set on April 13.
Areas with 20% of GDP Locked Down
China stocks fell in early trading on Thursday as concerns over the record-high caseload overshadowed optimism from fresh economic stimulus.
While official infection tallies are low by global standards, China tries to stamp out every infection chain, making it a global outlier under a signature policy of President Xi Jinping.
China recently began loosening some measures related to mass-testing and quarantine, and is trying to avoid catch-all measures such as lockdowns like the one imposed on Shanghai’s 25 million residents.
Recently, cities have been using more localised and often unannounced lockdowns. In Beijing, for example, numerous residents said they had received notices from their housing compounds in recent days informing them of three-day lockdowns.
Analysts at Nomura estimate that more than one-fifth of China’s total GDP is under lockdown, a figure that exceeds the size of 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,” Nomura analysts wrote.
The bank has also lowered its GDP growth forecast for next year to 4.0% from 4.3%.
The city of Zhengzhou, where workers at the massive Foxconn factory that makes iPhones for Apple staged protests, announced five days of mass testing in eight of its districts, the latest city to revive daily tests for millions of residents.
- Reuters with additional editing by Jim Pollard