China reported a record number of COVID-19 infections on Thursday, with cities across the country imposing location-specific lockdowns and other restrictions that are dimming the outlook for the world’s second-largest economy.
China’s COVID cases hit record high, economic outlook worsens
The surge in the number of infections, which has reached a record high since an outbreak in Shanghai earlier this year, is dampening investors’ hopes that China will soon ease its rigid “zero COVID” policy, which, along with the decline of the real estate market, is affecting the economy.
The restrictions have also taken a toll on increasingly frustrated Chinese residents as well as factory output, including the world’s largest iPhone plant, which has been rocked by violent clashes between workers and security personnel in a rare display of dissent.
“We believe that reopening will likely be a lengthy process with high costs,” Nomura analysts wrote in a note. The brokerage cut its GDP forecast for the fourth quarter to 2.4% year-on-year from 2.8%, and also cut its growth forecast for the full year to 2.8% from 2.9%.
Chinese leaders have stood firm on their “zero COVID” policy, which includes some of the world’s strictest restrictions, saying it is necessary to save lives and prevent the medical system from being overwhelmed.
However, in an acknowledgment of the pressure on the economy, the cabinet said that China will use timely cuts in banks’ cash reserves and use other monetary policy tools to ensure there is sufficient liquidity, according to media reports. on Wednesday, a hint that a cut in the required reserve ratio (RRR) could come soon.
China recorded 31,444 new local COVID cases for Wednesday, surpassing the record set on April 13, when Shanghai was under a two-month city lockdown.
Chinese stocks fell on Thursday as concerns over a record number of cases overshadowed optimism over new economic stimulus.
Although official contagion figures are low by global standards, China is trying to end all chains of contagion, making it a global exception under a flagship policy of President Xi Jinping.
Recently, China has begun to ease some measures related to mass testing and quarantine, and is trying to avoid blanket measures such as lockdowns, such as the one imposed on Shanghai’s 25 million residents.
Recently, cities have turned to more localized and often unannounced lockdowns. In Beijing, for example, many residents reported receiving notices from their housing complexes in recent days informing them of three-day lockdowns.