View of the empty streets of Shanghai on the 12th BLOOMBERG VIA GETTY IMAGES
After more than two weeks of strict detention in Shanghai, PCR tests, done every two or three days, are the only outlets allowed. An opportunity to appreciate the magnitude of the change: the downtown streets, normally stormed by consumers competing for selfies outside trendy cafes, are now occupied only by residents in single file, maintaining the 2 meter distance . In ten minutes outside we sometimes see a single truck driving by. Supplying the townspeople is a logistical headache. Most factories have stopped producing anything: they can no longer procure materials and spare parts and can no longer supply their products.
The answers to your questions: Drastic containment against Covid-19 in Shanghai: What is China willing to accept: growing economic impact or a certain number of deaths? »
The curtailment of China’s economic and financial capital is a blow to the whole country. Nio, an electric car maker based in Hefei, Anhui, a city that is not restricted, had to halt production in the second week of April due to missing components. “Shanghai is a very important industrial center, both for finished products, but even more so for high-tech components, for the automotive industry, electrical engineering or new materials,” says Dan Wang, chief economist at Hong Kong bank Hang Seng. But it is also an important center for quality services: of course, legal advice, intellectual property and finance. »
IPOs are impossible as they require obtaining a stamp in a closed administration. But that’s a problem 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 leads to very low liquidity and high borrowing costs. In response, on Friday, April 15, the Chinese central bank announced a reduction in reserve ratios imposed on banks.
Most industries are at a standstill
The example of Shanghai prompted the rest of the country to be even more determined in the face of the virus: 373 million people, more than a quarter of the population, have been subject to restrictions ranging from travel difficulties to a total ban on moving. according to an analysis by Nomura Bank published on April 11. On the same day, Canton announced the suspension of classes and a ban on leaving the city for 27 cases of Covid. Result: Rail transport, the main mode of transport for the Chinese between major cities, fell to 30% of 2019 levels at 3,000 trains per day in early April. Economic institutes have already lowered their growth forecasts for 2022. According to a Reuters poll of a panel of economists, gross domestic product (GDP) rose 0.6% in the first quarter thanks to a dynamic start to the year, but activity slowed from March. Growth is expected to reach 5% in 2022, below the government’s announced 5.5% target, economists polled by Reuters predict.
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