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An almost empty egg display at a supermarket in Beijing, April 25, 2022. New cases of Covid-19 in Beijing prompted citywide testing.

Kevin Frayer/Getty Images

Massive Covid-19 lockdowns in Shanghai have rocked China, prompting rare public outcry and leaving Beijingers wondering if they’re next.

Even with less than 100 officially reported cases, Beijing has begun citywide testing and the lockdown of some neighborhoods has caused panic buying which emptied many grocery stores and supply stores across the city.

What might seem like a knee-jerk reaction to observers in countries with thousands of daily cases, the answer makes more sense to those inside China. Beijing, as the country’s political center, reacted quickly and harshly to every small outbreak during the more than two years of the pandemic.

“Supermarkets have an apocalyptic feel,” said Wu Ailin, who works at a video game company in Beijing’s district with the most cases. Barrons Tuesday. “And we were ordered to get tested three times this week, all at local clinics,” she said.

Another middle-aged resident, who gave his surname Li, said as he picked the last tomatoes from a market in central Beijing, “everyone is afraid it will turn into a nightmare at Shanghai”.

And investors in China and around the world also fear a prolonged impact from the country’s draconian measures. Rumbling supply lines and freezing factory activity are by no means a problem unique to Shanghai. Cities and towns across China, home to some 300 million people, are under some form of restriction on movement.

China has set its GDP growth target for 2022 at 5.5%, its lowest rate in 30 years. Yet it may not even reach that modest number, according to most experts. The International Monetary Fund cut China’s GDP growth in 2022 to 4.4% from 4.8%, nearly half of its 8.1% last year.

Chinese factory activity hit a two-year low this month, and Ting Lu, chief China economist at Nomura, said Barrons he expects export growth to slow to zero for March and April, due to transport disruptions.

It doesn’t help that other factors are weighing on an economy crippled by government-imposed lockdowns. The real estate sector, which accounts for more than a quarter of China’s GDP, is still grappling with a year of lingering crisis, which has essentially barred Chinese developers from accessing global debt markets.

Yet the sharpest pinch in China appears to be in low-income households. IMF experts wrote last week that during the pandemic, China “saw the largest increase in household debt ratios among countries for which detailed data is available,” and that the poorest saw their debt levels increase the most.

The blow is visible in the consumption gauges. Retail sales fell 3.5% in March from a year earlier. On Saturday, a prominent Chinese newspaper columnist even called on the government to start handing out cash.

And while top leaders have repeatedly said they will roll out sweeping stimulus packages, little has materialized so far. Instead, unlike most other major economies, China has adopted loose monetary policies.

“Monetary policy in China is going in the opposite direction compared to the rest of the world. We believe such policy easing is necessary for the Chinese economy, which has been hit by previous tightening and ongoing Covid controls,” said Iris Tan, senior equity analyst for Morningstar, in a recent note. “The market expects more policy easing to come in to restore confidence and boost demand. But what we’ve seen from the recent move in the PBOC is that they’re reluctant to initiate credit easing. in large scale.

Tan said that in this lending environment, large public banks were smarter investment choices than smaller ones. His first choices are


Agricultural Bank of China

(1288.Hong Kong),


China Construction Bank

(939.Hong Kong),


China Merchants Bank

(3968: Hong Kong), and


Postal Savings Bank of China

(1658: Hong Kong).

But overall, the Chinese stock market does not appear to have bottomed out. The benchmark Shanghai Composite Index hit a two-year low on Monday and fell further on Tuesday. Hong Kong’s Hang Seng Index and its tech sub-index both fell about 4% before rebounding slightly on Tuesday. The Chinese yuan also weakened to its lowest level in a year against the US dollar.

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