China reported a record-high number of COVID-19 infections on Thursday, with cities nationwide imposing localised lockdowns and other curbs that are darkening the outlook for the world's second-largest economy.
The surge in the number of infections, at record highs not seen since an outbreak in Shanghai earlier this year, is diminishing investors' hopes that China will soon ease the rigid zero-COVID policy that, along with a downturn in the property market, is battering the economy.
While many countries around the world violated the civil rights of their citizens through much of the past two years in attempts to contain the pandemic, China currently remains the only nation to insist on house arrest as a form of epidemic management, resulting in criticism even from the World Health Organization.
The restrictions have also extracted a toll on China's increasingly frustrated residents, as well as output at factories including the world's biggest iPhone plant, which has been rocked by violent clashes between workers and security personnel in a previously rare show of dissent.
The NGO Freedom House revealed in a report published last week, anti-communist protests are “a daily occurrence in China.”
“Not only is dissent in China frequent, it’s also widespread. Since June, people have protested in nearly every province and directly administered city,” Freedom House communicated. “Moreover, even as authorities make every effort to prevent protestors from connecting, we found many instances where people manage to form decentralised movements that increase the impact of their dissent,” the report stated.
“We believe reopening is still likely to be a prolonged process with high costs,” Nomura analysts wrote in a note. The brokerage cut its GDP forecast for the fourth quarter to 2.4 percent year-over-year from 2.8 percent, and also cut its forecast for full-year growth to 2.8 percent from 2.9 percent.
China's leadership has stuck by its zero-COVID policy, which includes some of the strictest restrictions in the world, saying it is necessary to save lives and prevent the medical system from being overwhelmed.
However, in an acknowledgement of the pressure on the economy, the cabinet said China would use timely cuts in bank cash reserves and use other monetary policy tools to make sure there is enough liquidity, state media reported on Wednesday, a hint that a cut in the reserve requirement ratio (RRR) may be coming soon.
China recorded 31,444 new local COVID cases for Wednesday, breaking the record set on April 13, when Shanghai was in a city-wide lockdown that would last two months.
China stocks fell on Thursday as concerns over the record-high caseload overshadowed optimism from fresh economic stimulus.
While official infection tallies are low by global standards, China tries to stamp out every infection chain, making it a global outlier under a signature policy of President Xi Jinping.
Nomura analysts estimate that more than one-fifth of China's total GDP is under lockdown, a figure that exceeds the size of the British economy.
“Shanghai-style full lockdowns could be avoided, but they might be replaced by more frequent partial lockdowns in a rising number of cities due to surging COVID case numbers,” Nomura analysts wrote. The bank has also lowered its GDP growth forecast for next year to 4.0 percent from 4.3 percent.
The city of Zhengzhou, where workers at the massive Foxconn factory that makes iPhones for Apple Inc staged protests, announced five days of mass testing in eight of its districts, the latest city to revive daily tests for millions of residents.
Reuters, Freedom House