Amid a surge of Covid-19 infection in the technological hub of China, Shenzhen, nearly 17.5 million residents were put into lockdown for a week once again. According to Bloomberg Economics, this action could have adverse effects on the Guangdong province in China, which accounts for 11% of the country’s GDP.
The decision to impose a lockdown on Shenzhen does not come as a surprise, like other provinces in China scramble about to battle the outbreak of coronavirus once again. In-person classes have been suspended in Shanghai, while Changchun, a city of 9 million people that accounted for 11% of the country’s total car output in 2020, was locked down last week.
Economists worried about the implications that a week-long lockdown could have on the GDP
Chang Shu and David Qu of Bloomberg Economics wrote in a note on Monday that the steps taken by the Chinese government to contain the rise in the number of coronavirus cases left manufacturing unscathed for the most part. This lockdown, however, will directly hit output industries that feed into global supply chains like tech and machinery. It will impact consumption, output, and spillovers beyond China.
According to the chief economist for Greater China at ANZ- Raymond Yeung, more cities may follow in Shenzhen’s footsteps and impose lockdowns. He said if the lockdown is extended, the country’s economic growth will be affected significantly.
While ANZ is not revising its forecast for 2022, it is still wary of further restrictions that the government may impose in the country. They forecast a growth of 5% in the GDP, less than the government’s target of 5.5%.
If provinces along the coast and in the northeast follow Shenzhen’s footsteps and impose a lockdown, the total economic cost could amount to 0.8% of the GDP growth.
The Chinese government indicated it would stick to its zero-tolerance strategy to combat the virus.
The surge of Covid-19 cases on the Chinese mainland is infecting people across the nation, from Shenzhen to the coastal city of Qingdao, to Xingtai in the north. Relatively, the numbers are smaller compared to the reports in Europe and the USA, or even in Hong Kong, which had reported a total of 32,000 cases on Sunday.
Owing to the country’s zero-tolerance strategy, China has seen very few cases since the outbreak in Wuhan. The approach relies on stopping the transmission of the virus as quickly as possible by imposing strict lockdowns and compulsory quarantines for anyone who came in contact with a positive case.
Published By :- Shubham Agarwal
Edited By :- Kritika Kashyap
