For weeks now, economists everywhere worried that sticking with China’s Covid absolutism was a headwind the global system scarcely needs. A zero-case strategy that worked wonders in 2020 is no match for Omicron and more transmissible variants to come. Worse, it’s backfiring on Asia’s biggest economy, on which the region is relying to drive recovery efforts.
Fresh lockdowns in Shenzhen, Shanghai and elsewhere are reaching a critical mass. They mean that roughly 400 million people across 45 mainland cities are under full or partial lockdown, notes economist Lu Ting at Nomura Holdings. Lu says we’re talking about roughly 40% of Chinese gross domestic product, or about $7.2 trillion.
“Global markets may still underestimate the impact, because much attention remains focused on the Russian-Ukraine conflict and U.S. Federal Reserve rate hikes,” Lu says.
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