Almost all major cities in China have shut down due to the current “zero-tolerance” prevention policy and reset program. The country’s economy, which has been already suffering triple pressure, has undergone a more substantial slowdown.
In December last year, the Annual Central Economic Work Conference pointed out that China’s economic development faces triple pressures of shrinking demand, supply shocks, and weakening expectations.
China makes up nearly one-third of the total global output for the manufacturing industry, with nearly 4 trillion dollars of the nation’s economic output in 2019.
However, Beijing’s current epidemic control efforts have sparked fears of additional supply chain disruption and increasing container freight.
China has been constantly stuck to its zero-covid policy. Sun Chunlan, one of China’s four Deputy Prime Ministers, stated on a visit to Jilin on March 13 that the country’s provinces should follow their zero-covid approach without compromise.
So far, more than 11 cities nationwide have been locked down due to the latest surge, putting tens of millions of people into lockdown.
Twenty-four million inhabitants in the north-eastern province of Jilin have been under the entire lockdown.
17.5 million Shenzhen residents and 10 million Dongguan inhabitants have remained confined to their homes.
Shenzhen, known as China’s Silicon Valley, has been placed under a 7-day total lockdown since March 13, affecting manufacturing and tech production in this city. It is also the heart of electronics manufacturing and the home of tech giants, including Huawei and Tencent.
One of Apple’s top iPhone manufacturers, Foxconn, closed operations at two of its largest manufacturing sites in Shenzhen following the city’s lockdowns.
Other major manufacturing centers, including Changchun, Langfang, other cities, and financial capital Shanghai, are under severe epidemic blockade, with nearly all production and logistics stalled.
While cargo ports in Shenzhen and Shanghai remained open, ships queued at the ports, and backlogs grew as blockade policies prevented vehicles from transporting products from factories and warehouses.
The shutdown of factories and logistics disruptions, in turn, triggered volatility in financial markets.
General economist and political and economic commentator Wu Jialong said that the current downward trend has caused investors to panic and sell. With uncertain markets, multinational companies could run away.
According to Financial Times, foreign investors sold a record 6 billion dollars worth of Chinese stocks in the first three months of 2022.
New loans, M2 money supply, and total social financing (TSF) witnessed a decline in its figure. Chinese banks distributed 1.2 trillion (190 billion dollars) in new loans compared to 4.0 trillion amount in January. Annual growth in the M2 money supply dropped from 9.8% in January to 9.2% in February. TSF – a broader measure of credit and liquidity in the economy – decreased from 10.5% to 10.2%. These numbers undershot market expectations.
Wu Jialong added that the whole of China’s economy would continue to go down. It happened not just in the northern part of China, which lacks electricity, but also in southern China, the reform frontier of the country.