Guangzhou Covid-19: China locks key transportation hub; Markets fear economic consequences

Hong Kong
CNN business

China suspended a major Transport hub in the south as the country grapples with its biggest nationwide Covid outbreak since April.

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

In recent days, China had begun to ease its strict Covid restrictions that had paralyzed local and international businesses for months. But experts fear Beijing’s determination to reopen the country may be faltering now that cases are rising again.

Asian markets and oil prices slid on Monday as investors worried about the prospect of China tightening again Covid rules. The Hang Seng

The index slipped as much as 3.4% in the morning. It closed down 1.9%. Mainland China’s Shanghai Composite Index lost 0.4%.

Oil prices also fell, with U.S. crude futures falling 0.4% in Asian hours on Monday. Brent crude, the global oil benchmark, fell 0.6%.

Guangzhou, one of China’s largest cities with nearly 19 million people, imposed a five-day lockdown on Baiyun District, home to one of the country’s busiest airports. Baiyun is also the most populous district in Guangzhou with 3.7 million people.

Schools will be closed, public transportation halted and residents advised to stay at home, according to a statement released on WeChat by the Baiyun county government on Monday.

The lockdown comes as Guangzhou scrambles to contain the worst Covid outbreak in three years. Guangzhou reported 8,181 cases on Sunday, bringing the total number of infections to over 80,000 since Oct. 22.

Fears of renewed urban standstill in the world’s second largest economy are growing. From Guangzhou in the south to Zhengzhou in the central region, rising cases have forced local governments to tighten lockdown measures in recent days. China reported 26,824 new cases nationwide on Sunday.

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

Shijiazhuang, the largest city in northern Hebei Province, also imposed a five-day lockdown from Monday, just days after it eased Covid rules significantly.

The recent outbreaks could make it harder for China to break away from its nearly three-year “zero Covid” policy.

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

Markets rallied after the move, with Hong Kong’s Hang Seng Index up a total of 14% over three sessions and entering a technical bull market last Tuesday.

But the new lockdowns hit market sentiment on Monday.

“The strong driver of the immediate downward momentum is growing unease that China will not ease Covid lockdown guidelines as infections resume,” said Stephen Innes, managing partner of SPI Asset Management.

Analysts at Goldman Sachs said the latest news about China’s Covid management has been “confusing” for investors.

“Our main message is that the first phase of reopening could be messy and bumpy, while the recovery after the initial hurdle could be very strong,” they added, expecting China’s GDP growth to slow to 4% from 3% in 2022 .5% in 2023.

— CNN’s Beijing bureau contributed to the coverage.

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