Kevin Yao, Josh Horwitz

SHANGHAI, (Reuters) – China’s most important European business group warned Wednesday that their “zero COVID” strategy is reducing Shanghai’s appeal as a financial center. This was in response to analysts who expressed concern over the economic impact of China’s coronavirus curbs.

China has spent the last month battling multiple pandemics using an elimination strategy which seeks to track, test and quarantine all confirmed COVID-19 cases.

Nomura said Tuesday that 23 Chinese cities had implemented partial or full lockdowns. These collectively house an estimated 193,000,000 people and account for 22% of China’s GDP.

China’s European Union Chamber of Commerce stated that this strategy caused increasing difficulty in shipping goods through the provinces, and to ports. It also harmed factory output.

Joerg WUTTE, President of the Chamber, stated to a roundtable media that China’s export ability would be affected. This could lead eventually to inflation.

COVID remains a common problem in China. He stated that the Chinese authorities need to educate people about COVID to reduce fear and make it easier to accept this type of uncertainty.

Travel restrictions

China has been restricting international travel severely for two years and shows no signs of slowing down.

Wu Zunyou (chief epidemiologist, Chinese Center For Disease Control and Prevention) stated Wednesday that China must strictly follow COVID guidelines if the situation in the epidemic is to improve.

A small number of economists has lowered their growth predictions for the first half 2022. The COVID surge and persistent property weakness make it difficult for China reach its full year target of about 5.5%.

According to Tang Jianwei, senior economist, the Shanghai-based Bank of Communications has reduced its projection for China’s GDP growth in the first quarter from 5% down to 4%. This drop was due solely to slowing March activity.

Shanghai has placed strict movement limits on 26 million of its residents. This bans them from ever leaving their front doors except to take COVID test.

Chief economist of Bank China Shanghai Dan Wang said that the main ripple effect from Shanghai’s lockdown is in the legal and financial services sectors.

Companies looking to become public, for example, will typically meet with Shanghai-based legal teams to discuss their plans. However, current travel restrictions prohibit them from doing so.

She stated that macro confidence would collapse if the lockdown continued like this and this will reflect in stock markets. I expect that monetary easing will occur in the second quarter.