Guangzhou Covid-19: China locks down key transportation hub; markets fear the economic fallout

Hong Kong
CNN Business

China has blocked an important transportation hub in the south, as the country grapples with its biggest nationwide covid outbreak since April.

The lockdown also follows a rise in cases in Beijing, which reported the country’s first Covid deaths in nearly six months.

In recent days, China had just begun to ease its harsh Covid restrictions, which had paralyzed local and international businesses for months. But experts worry that Beijing’s resolve to reopen the country may weaken now that cases are rising once again. Asian markets and oil prices fell on Monday as investors worried about the prospect of China tightening Covid rules again.

Guangzhou, one of China’s largest cities with nearly 19 million people, imposed a five-day lockdown in Baiyun district, which is home to one of the country’s busiest airports.

Baiyun is also the most populous district in Guangzhou, home to 3.7 million people.

Schools will be closed, public transportation services will be suspended and residents are advised to stay at home, according to a statement posted by the Baiyun district government on WeChat on Monday.

Shutdown comes as Guangzhou struggles to contain the worst Covid outbreak in three years. Guangzhou reported 8,181 cases on Sunday, bringing its total number of infections to more than 80,000 since Oct. 22.

There are growing fears that cities will once again come to a standstill in the world’s second-biggest economy. From Guangzhou in the south to Zhengzhou in the central region, rising cases have forced local governments to intensify lockdowns in recent days. China reported 26,824 new cases nationwide on Sunday.

Beijing, the country’s capital, recorded three covid deaths over the weekend. His Haidian district has canceled face-to-face classes, according to a statement from the district government on Sunday.

Shijiazhuang, the largest city in the northern province of Hebei, also reimposed a five-day lockdown starting Monday, just days after it significantly relaxed Covid rules.

The latest outbreaks could complicate things for China to relax from its almost three-year “zero-Covid” policy.

On November 11, the central government eased some of its strict Covid restrictions. The move raised hopes that China was moving away from its draconian zero-tolerance approach, which has crippled its economy and largely isolated the country from the rest of the world in recent years.

Markets rallied after the policy change, with Hong Kong’s Hang Seng Index rising a combined 14% over three sessions and entering a technical bull market last Tuesday.

But the new lockdowns affected market confidence on Monday. The Hang Seng Index (HSI) fell as much as 3.4% in the morning. It closed with a fall of 1.9%. The Shanghai Composite Index of mainland China lost 0.4%.

Oil prices also fell, with US crude futures falling 0.4% in Asian trading hours on Monday. Brent crude, the world benchmark for oil, fell 0.6%.

“The main driver of the rapid downward momentum is growing concern that China will not relax Covid lockdown policies because infections are rising again,” said Stephen Innes, managing partner at SPI Asset Management.

Goldman Sachs analysts said on Monday that the latest news on China’s handling of Covid has been “confusing” for investors.

“Our main message is that the first stage of reopening can be complicated and bumpy, while the rebound after the initial hurdle could be very strong,” they added, expecting China’s GDP growth to accelerate from 3% in 2022 to 4.5% in 2023.

CNN’s Beijing bureau contributed to the report.

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