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China’s COVID-19 Cases Hit Record High; Overshadow Economic Outlook

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China witnessed a record-high number of COVID-19 cases on Thursday, which forced localized lockdowns with various other measures that are weighing heavily on the outlook for the world’s second-largest economy.

The rise in the number of covid cases is at a record high which is not seen since the increase in the cases in Shanghai earlier this year. Investors are losing hope that China’s strict zero-COVID policy, which, coupled with a decline in the housing market, is hurting the economy, would soon be relaxed.

The restrictions have taken a toll on China’s growingly frustrated residents, as well as production at factories including the world’s biggest iPhone plant, which has been affected by violent clashes between workers and security personnel in a rare show of dissent.

China tightens economic policies

Nomura analysts shared a note, reading, “We believe reopening is still likely to be a prolonged process with high costs.” The firm lowered its estimates for full-year growth from 2.9% to 2.8% and the GDP for the fourth quarter from 2.8% to 2.4% year over year.

China’s leadership has been adamant about its zero-COVID policy, which contains some of the strictest restrictions in the world, calling it necessary for saving lives and preventing the medical system from being overwhelmed.

The cabinet, acknowledging the force on the economy, said, according to state media on Wednesday, China would use timely reductions in bank cash reserves and other monetary policy tools to ensure there is enough liquidity. This suggests that a reduction in the reserve requirement ratio (RRR) may be on the horizon.

China recorded 31,444 fresh local COVID cases on Wednesday, surpassing the record set on April 13, when Shanghai was in a city-wide lockdown for the next two months.

China stocks went down on Thursday after concerns over the record-high infections took over the optimism from a fresh economic boost.

China aims to break every chain of infection, making it a global outlier and a global outlier under President Xi Jinping’s trademark programme, even though official infection tallies are low by global standards.

China has now begun going light on some measures like mass testing and quarantine and is trying to avoid serious measures such as lockdowns like the one imposed on Shanghai’s 25 million residents.

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