China’s Covid lockdown could have economic costs to the world, says strategist

China has tightened Covid-19 measures to combat an uptick in daily cases — a move that could hold back the country’s economic growth and hit its stock markets, said veteran strategist David Roche. Investor sentiment toward Chinese stocks has been dampened by Beijing’s regulatory crackdown on sectors including technology and after-school tutoring.

“Markets have got into the mode of thinking Covid is very … bad, but economic recovery (is) taking away lockdowns, removing social restrictions — that’s kind of the world recipe at the moment,” Roche, president and global strategist at Independent Strategy, told CNBC’s “Street Signs Asia” on Tuesday. “Well it’s very much not the world recipe in China for good reasons, and therefore markets have to come to terms with the fact that there are economic costs not only within China, but globally as a result of this,” he added.

The country’s National Health Commission reported 143 new Covid cases in mainland China on Monday — the highest number of daily infections since January, according to Reuters. Chinese state media attributed the latest resurgence in infections to the highly transmissible delta variant. Chinese authorities last week ordered mass testing in Wuhan city — where the coronavirus was first detected — and imposed widespread movement restrictions in major cities including Beijing.

Some economists have raised concerns about China’s “zero tolerance” approach to Covid, which refers to the country’s aggressive clampdown on any flare-ups in Covid cases. The approach, which includes strict lockdowns and mass testing, helped China keep previous outbreaks under control before the latest resurgence. But the delta variant is more contagious and could be more difficult to contain — and that could hurt economic recovery in China, economists have warned.

China’s Covid lockdown could have economic costs to the world, says strategist, CNBC, Aug 10