China’s Covid lockdowns are hitting more than just Shanghai and Beijing | CNBC - Evelyn Cheng:
May 5, 2022 - "While the bulk of China’s new Covid cases are in Shanghai and Beijing, data show the impact of business restrictions is more widespread. For one, nearly 60% of European businesses in the country said they were cutting 2022 revenue projections as a result of Covid controls, according to a survey late last month by the EU Chamber of Commerce in China.... Among Chinese businesses, monthly surveys released in the last week showed sentiment among manufacturing and service businesses fell in April to the lowest since the initial shock of the pandemic in February 2020. Official and third-party versions of the survey, known as the purchasing managers’ index, pointed to further contraction in business activity from March....
"Power generation rose in the first two months of the year, but slowed to zero growth in March, according to figures cited by Larry Hu, chief China economist at Macquarie. He expects a drop in power generation in April. In the massive real estate sector, Hu noted that lockdowns also make it 'physically impossible to buy property,' sending sales in the top 30 cities down 54% in April from a year ago.
"On the consumer front, companies like Starbucks are reporting a widespread impact from Covid. In the quarter ended April 3, the coffee giant said 72% of the 225 Chinese cities it operates in experienced omicron outbreaks.... Starbucks’ China chairperson Belinda Wong ... noted that most of the stores still able to operate do so under 'strict safety protocols that interfere with our traffic and operations.' Starbucks said as of Tuesday, a third of its stores remain temporarily closed, or only offer delivery or takeout....
"Since March, mainland China has faced its worst Covid outbreak since early 2020 — using the same zero-Covid strategy.... Manufacturing areas from the northern province of Jilin to the southern city of Shenzhen were among those initially forced to lock down.... Shanghai, China’s largest city, essentially remained locked down for all of April. The capital city of Beijing began tightening travel and business restrictions toward the end the month to control a spike in Covid cases. With China’s two largest cities by GDP under Covid controls for the five-day holiday that ended Wednesday, national tourism revenue for the period only recovered to 64.68 billion yuan ($9.95 billion) — 44% of pre-pandemic levels, official figures showed.
“'During lockdowns, residents only consume daily necessities, so consumption will inevitably slump, not to mention that price could easily triple during city-level lockdowns,' said Yue Su, principal economist at The Economist Intelligence Unit. 'Lack of confidence in the private sector will drag investment and employment, which will take a much longer period of time to restore even if China introduces more stimulus,' she said. China reported better-than-expected first quarter GDP growth of 4.8% from a year ago. But retail sales fell in March, while unemployment in the country’s biggest cities set a new high for the pandemic so far.
"Lockdowns are affecting 'consumers’ ability to reach stores, grocery stores, department stores,” American household products giant Procter & Gamble said in an earnings call last month. 'Even online shopping is significantly constrained due to the inability to deliver.' The company said the market for its products in China didn’t grow in value in the first three months of the year, and that 'with the continued lockdown and difficulties in the market, we would expect April to be flat to negative.'
"While Shanghai’s prolonged lockdown experience could help other cities better organize food and medical services, the EIU’s Su said that local governments with poor finances would find it difficult to maintain the zero-Covid policy without transfers from the central government. This week, among smaller cities tightening Covid controls, the city of Zhengzhou ordered residents to work from home and for schools to move online through the end of Tuesday.... Other than Shanghai, large cities such as Fuzhou, Suzhou, Tianjin, Shenzhen and Xi’an were partially locked down in April....
"Nationwide, about 327.9 million people in more than 40 cities are affected by the latest lockdowns, Nomura’s chief China economist Ting Lu estimated Wednesday. That’s about 31% of China’s GDP, down slightly from last week’s 35.1% share, he said."
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