[Correspondent Diary] China Running with One Leg Tied

Shanghai lockdown enters 21st day with over 20,000 new cases... Partial lockdown measures also in place in Xi'an
China's economic core domestic market frozen while interest rate cuts and stimulus measures are implemented

Due to lockdown measures, the roads in Shanghai were empty on the 16th.
Photo by Reuters Yonhap News

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The massive city of 25 million people has been locked down for three weeks. Nevertheless, more than 20,000 new COVID-19 Omicron infections are reported daily. As of the 16th, Shanghai's daily confirmed cases stand at 24,820 (including 21,582 asymptomatic cases). Since March, the cumulative confirmed cases have reached 340,000. It is unknown how many close contacts, aside from the infected, have been classified and transferred to separate facilities.

With 25 million people confined indoors simultaneously, food supply has become an immediate issue. Procuring daily necessities is far from adequate. The biggest problem is the shortage of delivery workers. In response, JD.com, China's largest e-commerce company, sent over 3,000 delivery workers to Shanghai. Chinese media such as Pengpai reported that JD delivery workers selected from various cities including Chongqing arrived in Shanghai by chartered flights on the 15th and 16th. This is the first time delivery workers, rather than medical staff like doctors, have been sent to a locked-down city since the pandemic began.

As a result, there are many loopholes. Those who came from outside to help Shanghai residents have not arranged lodging and meals. Most facilities capable of accommodating guests, such as hotels, are being used as quarantine centers, making it difficult for these workers to find places to stay and eat. Chinese media reported that JD is negotiating with hotels and other lodging businesses not designated as quarantine facilities.

Currently, it is known that 18,000 people are handling an average of 1.8 million orders per day for delivery.

[Image source = China First Financial Capture]

As it becomes harder to secure food ingredients, profiteering by some vendors has become a headache. Despite warnings from authorities such as the police to punish offenders, some vendors have raised prices two to three times higher than usual, causing complaints throughout the city. There have also been delivery scams where money was taken but food ingredients were not delivered.

A lockdown order has also been imposed in Xi'an, Shanxi Province. Xi'an city authorities announced partial lockdown measures until the 19th. They closed multi-use facilities and suspended indoor dining at restaurants except for delivery until the 19th. Public transportation such as city buses and subways require a negative nucleic acid (PCR) test certificate within 48 hours to board. Although Chinese authorities emphasize this is a temporary closure rather than a lockdown, the possibility of following Shanghai's path cannot be ruled out. Xi'an was locked down for 33 days last December.

Despite the side effects such as the paralysis of Shanghai's urban functions, Chinese authorities continue to adhere to the Chinese-style quarantine policy of lockdowns. At the same time, they have lowered interest rates as a measure to stimulate the economy. It is like tying one leg of a running horse while whipping it.

Last year, consumption (domestic demand) contributed 65.4% to China's gross domestic product (GDP). Domestic demand is the barometer of China's economy. The Caixin service sector Purchasing Managers' Index (PMI) compiled last month was only 42. This is even lower than the 43 recorded in March 2020, when COVID-19 first broke out.

Attention is focused on whether there will be any changes in China's quarantine policy following the announcement of China's economic growth rate on the 18th.