The recent COVID-19 lockdowns are having a huge impact on the world’s second biggest economy.
Chinese stocks slumped deeper into a bear market and the yuan traded near a 17-month low as investors grow increasingly pessimistic.
Starting this week, the yuan traded offshore at 6.57 to the US dollar recording its lowest level since November 2020. This represents a sharp contrast with its performance during the pandemic last year, when the Chinese currency was one of the strongest in the world.
Also, this week the Shanghai Composite index closed down 1.4%, accumulating a 22% loss since its peak in September 2021.
China strict covid restrictions are expected to come with a hefty economic price. After a monthlong lockdown in the financial and manufacturing hub of Shanghai more businesses are shutting down and now Beijing is sparking fears that the Chinese capital could join a growing list of cities in the lockdown.
“As cases erupt in Beijing, there is concern that prolonged lockdowns will hit employment and lead to a sharp slowdown in growth as well as sparking fresh shipping logjams and supply chain issues,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown to BBC.
According to analysts China’s covid crisis is a major threat to global supply chains and may create chaos for next summer.