China’s lockdowns to halt a wave of Omicron infection is costing the country US$46 billion a month in lost economic output, or 3.1% of GDP, a university study in Hong Kong shows
Shanghai’s lockdown alone could cut China’s real GDP by 4%, the report says. Lockdowns in China’s three other biggest cities of Beijing, Guangzhou and Shenzhen would cause a 12% drop
On Monday (March 28), the number of new infections reached 3,500 in Shanghai, reports say
Lockdowns to contain the spread of COVID-19 are estimated to cost China at least US$46 billion a month, or 3.1% of GDP, as economic activity halts, according to a minimum estimate by an economist at the Chinese University of Hong Kong.
The report, carried by Hong Kong newspaper The Standard, comes as Shanghai disclosed 3,500 new Omicron cases on Monday (March 28), the first day of a four-day lockdown of 11 million people on the eastern half of the city called Pudong New Area.
The new infections prompted the authorities to order people to stay at home.
Lost economic output due to the lockdowns could double if more cities tighten restrictions to cope with the current wave of Omicron contagion in the world’s largest economy, Hong Kong’s The Standard newspaper reported on March 29, citing CUHK professor Zheng Michael Song.
“That’s a minimum estimate from an economist based on the assumption that cities generating about 20% of China’s gross domestic product are currently imposing targeted lockdowns,” the report said.
The Standard quoted Song as saying China’s tough measures mean “the economic cost of lockdown is clearly bigger than we see in other countries.” Song is part of a research team using real-time data to measure the impact of lockdowns.
He describes the 3.1% estimate, which is equivalent to 295 billion yuan (US$46.3 billion), as “conservative” as it hasn’t factored the impact of inflation on incomes, the report said.
Song and his team used data on the location of nearly 2 million trucks that crisscross China and whose movements are highly correlated with local economic activity, the report said.
Adding the impact on nationwide inflation and spillover effects from supply chains to the calculations could show a much worse effect, with the strict lockdown in Shanghai alone possibly reducing China’s real GDP by 4%, Song and his co-authors estimate.
If China’s four largest cities, Shanghai, Beijing, Guangzhou and Shenzhen, all underwent a strict lockdown together, national inflation-adjusted GDP would fall 12% for the duration of the shutdowns, they said.
A worst-case will be a lockdown of all cities for one month, which would cut national GDP by 53% over that period.
Container shipping giant Maersk said some of its depots in Shanghai remained closed from Monday until further notice. Its trucking service in and out of the city will be impacted by about 30% by the lockdown, which will shift to the city’s western half on April 1 amid a mass testing of all residents.
Maersk said all its warehouses and office counters in Shanghai will remain closed from March 28 to April 1, while its air cargo operations for freight in warehouses stay normal. The company said it won’t accept new cargo due to first mile delivery and labor constraints.
The eastern side of Shanghai is where high-technology, electronic and automotive industries are mostly located. It has a population of 11 million.
Among the industries at Pudong is SAIC Motor, China’s largest carmaker, which reported that it sold 322,000 vehicles in February this year, up 30.6% year on year.