[China's Easing vs Tightening] Stricter COVID-19 Controls... "No Opportunity to Spend Money"

[Image source=Yonhap News]

[Asia Economy Beijing=Special Correspondent Kim Hyunjung] Although China has actively pursued monetary easing measures such as lowering bank reserve requirements and expanding real estate loans, the liquidity released in the market seems to struggle to gain momentum. This is because Chinese authorities shifted their policy to a high-intensity zero-COVID prevention, causing a sharp decline in consumer activity. It is estimated that more than 400 million Chinese people are restricted in movement due to lockdowns and quarantines.

According to the National Health Commission of China on the 25th, the number of new COVID-19 cases nationwide the previous day was 32,695 (including 29,654 asymptomatic cases), marking the second consecutive day with over 30,000 cases, the highest since official statistics began in April 2020. Until early this month, the number of confirmed cases in China was around 2,700, but it surged to over 10,000 on November 10 and then jumped to over 20,000 on November 15, showing an unprecedented rapid spread.

On the same day, Beijing reported 1,860 confirmed cases (including 1,436 asymptomatic cases), who were transferred to centralized quarantine facilities. According to Bloomberg, as the number of people requiring quarantine surged and hospital beds became insufficient, the authorities are constructing Fangcang facilities in Beijing’s central business district (CBD). Fangcang, a prefabricated structure the size of a shipping container, is mainly used for temporary quarantine and treatment. The appearance of Fangcang in the city center indicates that the policy to restrict movement to control virus spread will not change for the time being.

[Image source=Yonhap News]

In Beijing, large shopping malls, pubs, bathhouses, and gyms have been closed. Restaurants remain open but operate mainly for delivery services. Even then, due to overwhelming delivery demand, there is a shortage of delivery workers, preventing timely consumption.

According to local media reports, 17 major cities in China are applying regulations to outsiders arriving locally, including mandatory consecutive 3 to 5 days of PCR testing, bans on entry to commercial facilities and entertainment venues, and prohibitions on gatherings and dinners. Eight locations including Shanghai, Hefei in Anhui Province, Nanchang in Jiangxi Province, and Changsha in Hunan Province have 5-day restrictions, while nine locations including Sanya in Hainan Province have 3-day restrictions.

According to Japan’s Nihon Keizai Shimbun, Nomura Securities estimated that as of the 21st, about 412 million people in 49 Chinese cities are under movement restrictions. This is an increase of 100 million compared to the estimate on the 7th.

Oxford Economics, a UK economic forecasting agency, predicted that if this situation continues, China’s economic growth rate next year will be 1 percentage point lower than previously forecast. Lewis Lu, Chief Economist at Oxford Economics, said that if China’s economic reopening is delayed until the first half of 2024, the recovery of private consumption will be delayed, and he revised China’s growth forecast for next year down from 4.2% to 3.2%.

He stated, "The risks to the short-term macro outlook have clearly tilted downward," and evaluated that lockdown measures have expanded nationwide due to the recent surge in COVID-19 cases. In his report, Chief Economist Lu noted, "The risks to the short-term macro outlook have clearly tilted downward," and that lockdown measures have significantly expanded due to the recent surge in COVID-19 cases. The International Monetary Fund (IMF) also advised that China must gradually and completely end its zero-COVID policy during next year to achieve the economic growth forecast of 4.4% for next year.