China’s Covid lockdown could have economic costs to the world - strategist

CNBC reports that veteran strategist David Roche said that China has tightened Covid-19 measures - a move that could hold back the country’s economic growth and hit its stock markets.

“Markets have got into the mode of thinking Covid is very ... bad, but economic recovery (is) taking away lockdowns, removing social restrictions — that’s kind of the world recipe at the moment,” Roche, president and global strategist at Independent Strategy, said.

“Well it’s very much not the world recipe in China for good reasons, and therefore markets have to come to terms with the fact that there are economic costs not only within China, but globally as a result of this,” he added.

Chinese authorities last week ordered mass testing in Wuhan city — where the coronavirus was first detected — and imposed widespread movement restrictions in major cities including Beijing.

Some economists have raised concerns about China’s “zero tolerance” approach to Covid, which refers to the country’s aggressive clampdown on any flare-ups in Covid cases. The approach, which includes strict lockdowns and mass testing, helped China keep previous outbreaks under control before the latest resurgence.

But the delta variant is more contagious and could be more difficult to contain — and that could hurt economic recovery in China, economists have warned.

“If lockdowns and vaccination progress do not allow local economies to reopen by mid-August or early September we will need to revisit our 8.8% 2021 GDP forecast,” economists from Australian bank ANZ wrote in a Tuesday report.