Shanghai closure increasingly costly for China

View of the empty streets of Shanghai on April 12.

After more than two weeks of strict confinement in Shanghai, the PCR tests, which are carried out every two or three days, are the only authorized exits. The opportunity to become aware of the magnitude of the change: the streets of the city center, usually assaulted by consumers competing for selfies in front of trendy cafes, are now occupied only by inhabitants in single file, respecting the distance of 2 meters. In ten minutes outside, sometimes we see a single truck go by. Supplying the townspeople is a logistical headache. Most factories have given up trying to produce anything: they can’t get materials or parts anymore, and they can’t deliver their products.

The answers to your questions: In Shanghai, drastic containment against Covid-19: “What is China willing to accept: a growing economic impact or a certain death toll? »

The confinement of Chinese economic and financial capital is a heavy blow for the entire country. Nio, an electric car manufacturer based in Hefei, Anhui, a city that is not confined, had to suspend production in the second week of April due to a lack of components. “Shanghai is a very important industrial center, both for finished products, but even more so for high-tech components, for the automotive, electrical or new materials industries, describes Dan Wang, chief economist at Hang Seng Bank in Hong Kong. But it is also a crucial center for high-end services: legal advice, intellectual property and finance, of course. »

IPOs are impossible because they require obtaining a seal in a closed administration. “But it is problematic for financial markets in general: traders who work from home are less productive. So they focus on the big deals and neglect the smaller ones. This results in a very low level of liquidity and high borrowing costs. » In response, the Central Bank of China announced a reduction in the reserve fees imposed on banks on Friday, April 15.

Most of the sectors are paralyzed

Shanghai’s example made the rest of the country redouble its steadfastness against the virus: 373 million people, more than a quarter of the population, were subject to restrictions, ranging from travel difficulties to a total ban on movement, according to an analysis of Nomura Bank published on April 11. On the same day, Canton announced the suspension of classes and the ban on leaving the city, due to 27 cases of Covid. Result: At the beginning of April, rail traffic, the main means of transport between major cities for the Chinese, fell to 30% of its 2019 level, with 3,000 trains daily. Economic institutions have already lowered their growth forecasts for the year 2022. According to a survey by the Reuters agency to a panel of economists, the gross domestic product (GDP) increased by 0.6% in the first quarter, thanks to a start dynamic year, but activity fell from March. Growth is expected to reach 5% in 2022, below the government’s announced target of 5.5%, economists polled by Reuters predict.

You have 53.8% of this article left to read. The following is for subscribers only.

Leave a Comment