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Lockdowns Continue to Impact China’s Economy

Millions of people in cities across China are living under strict COVID-19 lockdowns, restrictions and isolation requirements that are shrinking China’s economy, according to Reuters (subscription). 

The numbers: An estimated 26 Chinese cities are implementing full or partial lockdowns or other COVID-19 restrictions, accounting for 208 million people and 20.5% of China’s economic output. 

Beijing: In Beijing, a city of 22 million,”11 of [the] 16 districts have issued work-from-home instructions of varying degrees of severity, while public transport across the capital has been reduced and some shopping malls and other venues closed.”

  • China’s Vice Premier Sun Chunlan said the situation in Beijing is manageable but stressed that containment efforts must continue.

Shanghai: “In Shanghai, authorities plan to keep most restrictions in place this month, before a more complete lifting of the two-month-old lockdown from June 1. Even then, public venues will have to cap people flows at 75% of capacity.”

Economic implications: Analysts expect China’s economy to shrink in the second quarter and are predicting an extended downturn in China’s economic growth.

  • The country’s strict “zero-Covid” policies are deterring expats, many of whom have lives and worked in China for years. 
  • Several companies, including Airbnb, have exited China in recent months due to operational difficulties related to the pandemic.
  • More broadly, economists are concerned about the ripple effect of China’s slowing activity on the global economy.

Government action: The Chinese government has pledged to take measures to stabilize foreign investment.

  • It recently announced several plans to support its economy, including broadening tax credit rebates, postponing some loan repayments and social security payments and introducing new investment projects.
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