More than 40 cities affected: Chinese economy suffers from corona closures

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Workers in an electric machine factory in Harbin: The industry is weakening

Photo: Wang Song / dpa

The Chinese leadership's strict zero-Covid policy is increasingly burdening the country's economy.

Dozens of cities, which account for a third of gross domestic product, are already affected by closures.

Many consumer goods for the German market are also produced there.

The analysis house Capital Economics specifically counted 41 cities affected by corona measures, which account for 32 percent of Chinese economic output.

"For now, the resulting disruption may seem modest, but the risk of damaging lockdowns is growing," warned economist Julian Evans-Pritchard of Capital Economics.

"And even if they are avoided, we expect growth to remain subdued going forward."

Meanwhile, the list of major Chinese cities affected by corona restrictions is getting longer and longer.

Guangzhou near Hong Kong, which has almost 19 million inhabitants, reported only five locally transmitted infections on Wednesday.

Still, authorities ordered restaurants to be closed through Saturday in certain areas and indoor events to be canceled as well.

Kindergartens and elementary, middle and high schools must also remain closed, while the autumn semesters at the universities are being postponed.

Bus and subway connections have also been reduced.

The technology center Shenzhen has already ordered the closure of entertainment and cultural facilities in at least four districts with a total of around nine million inhabitants.

Restaurants will also not be able to open or only open to a limited extent for a few days.

The economic output of Shenzhen and Guangzhou together reached the equivalent of around 850 billion euros last year.

GDP growth severely subdued

The world's largest electronics market, Huaqiangbei, in the metropolis also known as the "Silicon Valley of China" has been tight since the beginning of the week.

In the north-east port city of Dalian, which is important for imports of soybeans and iron ore, the most important districts with a population of around three million were sealed off until Sunday.

Households are only allowed to send one person per day to go shopping.

If possible, employees should switch to the home office, while industrial companies should continue to do absolutely necessary and urgent work.

Kiel researchers warn of consequences for Germany

According to the Kiel Institute for Economic Research (IfW), these municipal lockdowns are also exacerbating bottlenecks in global supply chains.

However, the current measures in Shenzhen and other cities are not yet comparable to the drastic lockdown in Shanghai in spring.

"If the Covid-19 cases continue to rise, a tough lockdown, especially in and around Shenzhen, could put a strain on supply chains and the Christmas business," warned IfW trade expert Vincent Stamer.

»Because the province of Guangdong, around the metropolises of Guangzhou and Shenzhen on the Pearl River Delta, is China's province with the strongest exports.

Many consumer goods for the German market are also produced there.«

The Chinese industry is in bad shape anyway: It shrank again in August, as the survey by the statistical office showed.

The purchasing managers' index determined in the process fell by 0.4 to 49.0 points.

Growth is only signaled from the age of 50.

The survey suggests that economic activity showed little improvement in August compared to the previous month.

Not only are corona measures affecting the economy, but also the worst heat wave in decades and a crisis on the real estate market.

Banking economists have therefore lowered their forecast for growth in the world's second largest economy after the USA.

The experts from ANZ, for example, only expect an increase in gross domestic product of three percent this year, after four percent had previously been expected.

"The financial markets could come under pressure again in the next few weeks," warned the analysts at Nomura about the economic consequences of the strict corona measures.

"The downturn could be worse than markets previously anticipated." The local currency, the yuan, continued to depreciate against the dollar after falling to a two-year low on Monday.

Apr/Reuters