A large-scale lockdown across ‘zero-Covid’ China since Sunday, March 13, has raised concern about its economic downfall.
On Monday afternoon, authorities announced that 24 million people in Jilin province would go into lockdown. Earlier on Sunday, they ordered 17.5 million residents in Shenzhen, the southern city of Guangdong province with a giant tech hub, into a seven-day lockdown after three rounds of testing.
The Chinese government also reported 1.938 new Covid cases on Sunday, tripling Saturday’s figures.
The country is facing its worst Covid outbreak since 2020. Reuter said that China had recorded more COVID cases so far this year than in the whole of 2021.
A nationwide surge in COVID infections has seen authorities shut down schools, public transport, and businesses. According to Bloomberg Economics, the lockdown on Sunday will directly hit Guangdong province. They added, “the double hit to consumption and output, plus spillovers beyond China raise the stakes in this lockdown.” It will hurt output in tech and machinery industries, which feed into global supply chains.
Shenzhen is home to tech giants including Huawei, Tencent, Foxconn, and one of China’s key ports. According to Bloomberg Economics, Guangdong’s 795 billion dollars worth of export in 2021 accounted for 23% of China’s shipments that year, the most of any province. Major financial companies are also headquartered in the city.
Anxiety has mounted as even if the lockdown is in place for a short period, the impact is likely to last for much longer due to supply disruption in the city. In a note on Monday, March 14, Nomura Holdings Inc. said, “China’s economy could be severely hit again.”
On another note, economists at Australia & New Zealand Banking Group Ltd added, “More cities may follow the practice of Shenzhen,” and that, “If the lockdown is extended, China’s economic growth will be significantly affected.”