The horrible year – it’s a Latin phrase which in England attaches to the year 1992 when the marriage between Prince Charles and Princess Diana fell apart. But this year is shaping up to be just that for the Center here. The news this week was almost unrelentingly bleak. The virus exploded in Shanghai, with many thousands of cases and a city-wide lockdown that is apparently going to extend beyond the crucial date of April 5 – the Qingming grave-sweeping festival when the traditions of ancestor worship and filial piety rush back to the surface. No grave sweeping for the city this year.
But will it work, this massive shut down of the heart of China’s economy? The answer this time, according to many experts, is no, it will not stop the virus spread. If that is true, then this is where the Center’s zero covid policy hits a brick wall. Because Shanghai has to get back to work for the Chinese economy to keep on a reasonable track for the rest of the year.
There were other bad signs as well this week. It emerged that the Big Four international audit firms have been resigning from conducting audits of China property firms, which likely means that foreign money at least will have to sell them off. Major property firm Vanke announced profits down 45% and capital outflows were reported to be at record levels as foreign investors recalibrated their China exposure in light of the continuing Ukraine war.
Sanctions are biting deeper into the Russian economy, and while the Chinese leadership appear to have done nothing more than offer moral support, there is the clear possibility of sanctions hitting China as well if the Center maintains its current stance of primarily blaming the West. There is an EU-China meeting coming up next week, and this is going to impact on how it goes. For years, the European countries have failed to come up with a united approach to addressing China economic relations, but at one fell stroke, divide and rule would appear to be not an option, at least for a while. It’s just amazing how the Ukraine has upended so many chess boards. China risk considerations for investors are presumably markedly different today from, say, two months ago.
But then again, to look on the bright side, for most of China the sun is mostly shining as spring breaks out, so it’s not all horrible.
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