Analysts on China’s zero-Covid strategy and economic slowdown
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Workers work on a line of production at Shende Material Workshop in Lianyungang Economic and Technological Development Zone East China’s Jiangsu Province. October 31, 2021.
Wang Chun | Barcroft Media | Getty Images
An economist said Monday that China’s slowdown in economic growth will get worse as it continues to pursue its zero-Covid strategy.
Hao Zhou from Commerzbank, senior emerging market economist, said, “If China keeps to its zero-Covid Strategy, I believe domestic demand will be under stress.”
But, in the interim, we know there is no indication that China will relax its current policy. According to him, the Chinese economy will be slowing down over the coming quarters. He spoke on CNBC’s Monday show, “SquawkBox Asia.”
At first, Asia’s countries took a hard line and attempted to get rid of Covid inside their borders. However, they are now gradually reducing their aggressiveness. abandoned that strategyAs the highly infectious delta variant spreads, lockdowns become less effectiveControlling the virus
The zero-Covid strategy typically involves strict lockdowns — even after the detection of just one or a handful of cases — extensive testing, heavily controlled or closed borders, as well as robust contact tracing systems and quarantine mandates.
China continues to follow this strategy, unlike some of its neighboring countries. Shanghai Disneyland guests visited Shanghai on Halloween night had to take Covid tests in order to exit. This was after officials learned that close relatives of coronavirus cases had visited the park in the previous week.
China’s slowdown is caused by the real estate crisis and the energy crisis
China’s economy has been slowing as a severe energy crisis has hit, which is also affecting industrial activity.
The government is trying to decrease the sector’s leverage, but Evergrande, a real estate firm that has accumulated a lot of debt, remains in the limelight. Since then, fears have spread to many other Chinese developers who have defaulted or delayed their payments. Moody’s estimates that real estate and other related industries make up about 25% of China’s GDP.
The economy only grew 4.9%A Reuters survey of analysts revealed that the 3.Q3 missed expectations for a growth rate of 5.2%. This is a drastic drop in comparison to the previous quarter. a 7.9% expansion in the second quarter
CNBC tracks ten major banks trimmed their full-year forecasts for China’s GDP
“I believe the truth is that the economy is slowing down as much as it is. [the government] will put in place some targeted measures — which could include monetary policy measures — that try to target lending towards parts of the economy that are more innovative, that are seen as more productive,” said Eswar Prasad, a professor of trade policy at Cornell University.
According to CNBC’s Street Signs Asia, Beijing is facing a series of “very challenging challenges” regarding balancing acts.
“How do you get the economy to be less dependent on the industrial sector while … trying to maintain decent growth? How do you put the squeeze on the property sector … while trying to maintain growth and the property sector still remains a very important part of the economy?” Prasad said. Prasad said, “And how can you keep a dynamic economic system while the state intervenes in it is certain increasing?”
China’s tech titans have been subject to a crackdown this year by regulators. tightening rules around unfair competition data protectionYou can find out more.
— CNBC’s Holly Ellyatt, Evelyn Cheng, Yen Nee Lee contributed to this report.
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