Confinement of Shanghai more and more expensive for China

As the containment of the Chinese city is prolonged, the economic consequences are increasingly heavy for the whole country, which depends largely on its economic and financial capital.

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After more than two weeks of strict containment in Shanghai, PCR tests, performed every two or three days, are the only allowed outputs. The opportunity to become aware of the magnitude of change: the streets of the city center, usually stormed by consumers competing with selfies in front of fashionable cafes, are no longer occupied by the inhabitants in Indian file, Respecting the 2 meters of distance. In ten minutes outside, we sometimes see a single truck. The supply of the inhabitants of the city is a logistical puzzle. Most plants have stopped trying to produce anything: they can no longer stock up into materials and spare parts, and can not deliver their products.

The confinement of the Chinese economic and financial capital is a blow for the whole country. Nio, electric car manufacturer installed in Hefei, in Anhui, a city that is not confined, has had to suspend production, the second week of April, lack of components. “Shanghai is a very important industrial center, both for finished products, but even more for high-tech components, for the automotive industry, electric or new materials, describes Dan Wang, chief economist at The Hong Kong bank Hang Seng. But it is also a crucial center for high-level services: legal advice, intellectual property and finance, of course. “

Exchange introductions are impossible because they require getting a buffer in a closed administration. “But it’s problematic for financial markets in general: traders who have been working at home are less productive. So they focus on big transactions and neglect the smallest. This translates into a very low level of liquidity, and high borrowing costs. “In response, the Chinese Central Bank has announced a decline in reserve rates imposed on banks, Friday, April 15th.

Most sectors are stopped

Shanghai’s example pushed the rest of the country to redouble firmness against the virus: 373 million people, more than a quarter of the population, were under the restrictions, ranging from difficulties to travel to the Total prohibition to move, according to an analysis of the Nomura bank published on April 11. On the same day, Canton announced the suspension of classes and the prohibition of leaving the city, for 27 cases of Covid. Result: In early April, rail traffic, the main means of transport between major cities for the Chinese, fell to 30% of its 2019 level, with 3,000 trains per day. Economic institutions have already lowered their growth forecasts for the year 2022. According to a Reuters Agency survey from a panel of economists, gross domestic product (GDP) increased by 0.6%. First quarter, thanks to a dynamic beginning of the year, but the activity fell from March. Growth is expected to reach 5% in 2022, below the 5.5% target announced by the government, predict economists interviewed by Reuters.

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/Media reports.