China's "Zero COVID" strategy is starting to have serious repercussions for economic growth.
After sealing off Tianjin from travel, a city that's roughly 30 minutes from the Chinese capital of Beijing, earlier this week, the CCP is imposing still more lockdowns as it tries to stamp out the latest COVID outbreak that's vexing China's leadership just weeks before the start of the 2022 Winter Olympics in Beijing.
On Tuesday, Anyang, a city in the eastern province of Henan, became the latest Chinese city to enter into some form of lockdown. Its residents ordered to stay at home, non-essential businesses shut down, and people banned from driving on the roads, according to the Associated Press, which is also one of the few western news organizations with photographers on the ground inside Xi'an, a city of 13M that has been locked down since just before Christmas.
The lockdown of Anyang, with its 5.5MM residents, was announced late Monday in China, after two cases of the omicron variant were confirmed in the city. Not including Tianjin (where only certain neighborhoods have been locked down, while a travel freeze is in place for the entire city), the CCP now has three cities in different parts of the country on lockdown, with more than 20MM Chinese affected (still a tiny fraction of the country's 1.4 billion people.
Another 13 million people have been locked down in Xi’an for nearly three weeks, and 1.1 million more in Yuzhou for more than a week. It wasn’t clear how long the lockdown of Anyang would last, as it was announced as a measure to facilitate mass testing of residents, which is standard procedure in China’s strategy of identifying and isolating infected people as quickly as possible.
The Anyang omicron cases are believed to be linked to two other cases found Saturday in Tianjin. According to China's NHC, this is the first time that cases of omicron have spread within the country, aside from cases being identified in travelers arriving to China.
Anyang's leaders said that non-essential vehicles are banned from streets in a lockdown notice shared online by state media late Monday. The number of cases is still relatively low, with 58 new ones confirmed from the start of Monday to 0800 local time Tuesday morning. Meanwhile, in Tianjin, 97 people had tested positive in the city of 14MM people: 49 with symptoms, 15 without symptoms and 33 awaiting further verification. Xi'an and Yuzhou are both battling the delta variant and neither has reported any local cases of omicron.
China has reported roughly 200 cases per day over the past week, a drop in the bucket in the grand scheme of things. But then again, nobody can be sure what the "real" number is.
With chipmakers in Xi'an already reporting serious production disruptions due to the lockdown, analysts at Goldman Sachs revealed Tuesday morning in a note to their clients that they had cut their forecast for Chinese GDP growth in 2022.
"In light of the latest Covid developments - in particular, the likely higher average level of restriction (and thus economic cost) to contain the more infectious Omicron variant - we are revising down our 2022 growth forecast to 4.3%, from 4.8% previously".
With the Fed expected to slam the breaks on the US economy by hiking interest rates up to four times this year (or more), this doesn't bode well for the strength of the global economy as the world struggles to shake off the legacy of COVID and more than a decade of NIRP and ZIRP.