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Anti-virus restrictions in China raise fears of global economic impact

Antivirus controls that confine millions of Chinese families to their homes and the closure of shops and offices raise fears of further damage to already weak global businesses and trade.

The ruling Communist Party promised on November 11 to reduce disruption to its “zero-Covid” strategy by easing controls, but the latest wave of epidemics calls this into question, prompting major cities, including Beijing, to close populated neighborhoods, closing shops and offices and ordering factories to isolate their workforce from outside contact.

On Tuesday, the government reported that 28,127 cases had been discovered in the past 24 hours in parts of China, including 25,902 without any symptoms.

The number of infections in China is lower than that of the United States and other major countries, but the ruling party is sticking to “zero Covid”, which calls for the isolation of each case, while d other governments are easing travel and other controls and trying to live with the virus.

A worker in protective gear places closure notices on a barricaded restaurant in Beijing (Andy Wong/AP)

Global stock markets fell on Monday as concern over China’s controls added to unease over a Federal Reserve official’s comment last week that already-high U.S. interest rates may have to increase more than expected to curb the surge in inflation.

Investors are “worried about falling demand due to a less mobile Chinese economy amid fears there will be more Covid-related lockdowns,” StoneX’s Fawad Razaqzada said in a report. .

China is the biggest trader in the world and the biggest market for its Asian neighbours. Weak consumer or factory demand can hurt global producers of oil and other raw materials, computer chips and other industrial components, food products and consumer goods. Restrictions hampering activity at Chinese ports can disrupt global trade.

Economic growth rebounded to 3.9% from a year earlier in the three months to September, from 2.2% in the first half. But the activity was already beginning to ebb.

Retail spending fell 0.5% year-on-year in October, retreating from 2.5% growth the previous month as cities reimposed virus checks. Imports fell 0.3% in a sign of weaker consumer demand, a reversal from September’s 6.7% rise.

Virus outbreak in China
Residents line up for routine Covid-19 testing in Beijing (Andy Wong/AP)

Chinese exports fell 0.7% in October after US and European consumer demand was depressed by unusually large interest rate hikes by the Fed and other central banks to quell inflation that is to multi-decade highs.

Guangdong Province, an export-oriented manufacturing powerhouse that is the latest infection hotspot, recorded 9,022 new cases on Tuesday, nearly a third of the national total. This included 8,241 without symptoms.

On Monday, the government of the provincial capital, Guangzhou, suspended access to its Baiyun district, home to some 3.7 million people, following outbreaks.

Guangzhou last week announced plans to build quarantine facilities for nearly 250,000 people. He said 95,300 people from another district, Haizhu, were being transferred to hospitals or quarantined.

The government of Shijiazhuang, a city of 11 million southwest of Beijing, said factories that want to continue operating must impose ‘closed-loop management’, the official term for employees living at their premises. of work. This imposes additional costs for food and living space.

Businessmen and economists see the changes in virus controls as a step towards lifting the controls that isolate China from the rest of the world. But they say ‘zero Covid’ could stay in place until the second half of next year.

Virus outbreak in China
A man rests in a closed cafe in Beijing (Andy Wong/AP)

Entrepreneurs are pessimistic about the outlook despite government promises of less disruptive antivirus measures, according to a survey by researchers from Peking University and financial firm Ant Group Ltd.

He said a “trust index” based on responses from 20,180 business owners fell to its lowest level since early 2021.

The ruling party must vaccinate millions of elderly people before it can lift controls that keep most foreign visitors out, economists and health experts say.

“We don’t believe the country is ready to open up yet,” Louis Loo of Oxford Economics said in a report. “We expect Chinese authorities to continue to refine Covid controls over the coming months, moving towards a wider and more comprehensive reopening later.”