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China’s Covid controls are hurting more of the economy

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Pictured here is a Shanghai neighborhood under Covid lockdown on Nov. 7, 2022.
Qilai Shen | Bloomberg | Getty Images

BEIJING — China’s Covid situation is only getting worse, preventing the country from stamping out the virus and relaxing controls.

The daily case count surged to six-month highs over the weekend. Guangzhou indefinitely delayed its auto show that was supposed to kick off next week. And schools in Beijing are waffling over whether to shift classes online, according to social media.

As of Monday, China’s Covid controls negatively affected 12.2% of national GDP — up from 9.5% a week ago, according to Nomura’s model. The Japanese bank said more than one-fifth of China’s population was subject to some kind of control measures.

The southern province of Guangdong is the hardest hit, with cases mostly concentrated in one district. Recent Covid infections have been reported in more than 20 of China’s 31 province-level regions.

“One thing is very clear, a lot of business events have been cancelled and postponed,” Klaus Zenkel, vice president at the EU Chamber of Commerce in China and chairman of its South China chapter, said Tuesday.

“People don’t dare to travel. Too many restrictions,” he said, noting how companies from Guangzhou and Shenzhen “cannot even join” China’s international import expo in Shanghai this week. “How to maintain customer relations when we can’t meet face to face?”

It was not immediately clear whether there was any impact on factory production in the South China region. China’s Ministry of Commerce did not immediately respond to a CNBC request for comment.

The heightened impact of Covid on China’s economy came during a week in which many investors speculated that China would soon relax its stringent Covid policy.

Officials dispelled the rumors on Saturday, affirming at a press conference that the current zero-Covid policy remains.

“We continue to believe that, while Beijing may fine-tune some of its Covid measures in coming weeks, those fine-tuning measures could be more than offset by local officials’ tightening of the [zero-Covid strategy],” Nomura’s Chief China Economist Ting Lu and a team said in a report Monday.

Mainland China reported more than 800 Covid infections with symptoms and well over 6,600 without symptoms for Monday.

Other countries have far higher daily case counts, but have chosen to live with Covid.

Chinese authorities have expressed concerns about the ability of the country’s already strained healthcare system to handle a surge in Covid infections.

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