03.11.202123:58 Forex Analysis & Reviews: China faces second largest Covid-19 outbreak since Wuhan incident

This time, China was unable to promptly prevent the spread of the coronavirus. The delta variant is spreading throughout China, despite the most severe quarantine restrictions undertaken by the central and local authorities.

China is experiencing the second largest outbreak of Covid-19 since the incident in Wuhan

Moral fatigue from Beijing's strict restrictions leads the country's residents to the opposite effect. So, the police of the capital of China have launched a criminal investigation against people who ignore measures to combat the virus. And elderly tourists simply ignore inconclusive tests and hidden symptoms, continuing to travel around the country and have fun. Such behavior in groups at increased risk of Covid infection contributed to its spread.

More provinces are fighting the infection now than ever before. Of the 31 provinces, infection was established in 19. The number of cases exceeded 600 people.

Today alone, 93 new cases of infection have been registered and 11 asymptomatic carriers have been identified. Chongqing, Henan and Jiangsu were added to the provinces that reported cases of Covid.

In Beijing on Wednesday, 9 new cases of Covid lesion were identified, among them one asymptomatic. In general, there are 38 cases in the capital.

The policy regarding the fight against the spread of infection in the PRC is known for its exceptionally harsh measures and has already been called Covid Zero.

So, in Beijing, the sale of tickets to the city was stopped for trains from 123 stations in 23 regions, officials said at a briefing today. It got ridiculous: some residents who left the capital reported that they could not return because they were registered as having recently been in a part of the capital that is currently at high risk due to a small outbreak. Once at airports and train stations across China, many turned to social media to ask for help and criticize the government's actions.

Two schools in the capital were quarantined after a test by one of the teachers showed a positive result. Another 16 schools were closed only because their employees could be in the same place as the infected teacher.

Infected areas also act decisively.

China adheres to the Covid Zero policy

Chongqing, the municipality affected by the latest outbreak for the first time, promptly initiated mass testing according to the "golden 24 hours" policy. This pattern provides for the fastest possible response on a large scale to the very first cases of infection. Changzhou, a city in Jiangsu Province, has closed school for at least three days since Wednesday, and students have switched to online classes.

The measures taken by the leaders of the regions of the People's Republic of China can really be global.

In the county of Jiangxi Province in eastern China, all traffic lights turned red after detecting one case of the disease, putting an end to the 610-day record of the province without coronavirus. Despite the censorship in social networks and the usual caution of the Chinese in expressing their opinions, this step of the regulatory authorities was condemned. It was soon canceled and coverage resumed, local media reported.

But this is just one case of truly extraordinary measures out of many.

On Sunday, Disneyland was crowded with visitors when all the exits were suddenly blocked. The lockdown was carried out only because of a single identified case – a sick woman came from the neighboring province of Hangzhou. After that, people in Hazmat suits sealed the gates, preparing to check everyone for Covid-19.

On this day, 34,000 people were tested at Disneyland.

To the credit of the organizers, it must be said that the inspection ended before midnight, without detaining anyone for more than a day. Visitors to the park were later taken by two hundred and twenty buses to their homes, but with mandatory isolation of the house and a second test for Covid in 2 weeks.

The Chinese are tired of restrictions due to Covid-19

But one of the most significant cases remains the city of Ruili, located near the border with Myanmar. In recent months, a full lockdown has been introduced there four times already. More than 268 thousand residents cannot leave the city due to the fact that new cases of infection occur due to contacts with Myanmar, which the coronavirus has completely covered.

The former deputy mayor of the city a week ago asked for additional support from the metropolitan authorities, saying that he could not control the virus alone. Constant restrictions have almost destroyed small businesses in the city. Local media last weekend reported on a child who had been tested for Covid 74 times since September last year.

"Due to the prolonged blockages, the city is at an impasse," Dai Rongli, a former deputy mayor of Ruili, said on a social network last Thursday– "It is urgent to resume production and vital enterprises. The government should learn lessons from how to find a balance between the big picture and the local situation, as well as people's livelihoods and Covid control."

"Every blockage is a serious emotional and material loss," said Dai, who is currently one of the heads of the state railway construction company, and obviously sees how the consequences of quarantine measures affect traffic volumes. "Every battle against Covid adds a layer of unhappiness. Officials endured adversity while standing guard at the border. Ordinary people exhaust their funds and passively accept reality every time an epidemic occurs."

Dai's comments sparked an emotional response on Chinese social media, where his posts went viral as people sympathized with Ruili's predicament.

However, so far the Chinese authorities are not considering alternative Covid Zero scenarios.

There are no alternatives to China's harsh measures

Zeng Guang, a former chief epidemiology researcher at the Chinese Center for Disease Control and Prevention, explained to local media that the country's commitment to this strategy is partly due to insufficient vaccination and the need for "updated" vaccinations against Covid. At the moment, the country has fully vaccinated more than 75% of 1.4 billion people with home vaccinations. Now there is a distribution of boosters to adults.

Vaccinations, mainly produced by Sinovac Biotech Ltd. and state-supported Sinopharm, use more traditional inactivated vaccine technology, which, unfortunately, has proved less effective at stopping transmission and infection than vaccinations with a weakened strain that are used in the West. The Chinese company Shanghai Fosun Pharmaceutical Group Co. has the right to distribute the Pfizer Inc. BioNTech SE vaccine on the mainland, but the U.S.-funded vaccine has not yet received regulatory approval.

Thus, the authorities are trying to limit the spread of the coronavirus until an effective large-scale vaccination is carried out. Already in the summer, it was obvious that China's restrictive approach in the field of vaccination carries great risks. It all comes down to who gets there first - the virus or the healthcare system. Although it is already too late to test the health of the nation for strength – the winter period contributes to the spread and more severe course of the virus.

China's economy is experiencing difficulties

However, the authorities are optimistic in their promises. According to an interview with state-run CGTN media, China's top health expert Zhong Nanshan is confident that the country will be able to contain the current outbreak within a month. However, we are talking only about the current outbreak.

Taking into account the key import conference at which President Xi Jinping is going to speak, scheduled for this weekend in Shanghai, and the Winter Olympic Games, which will be held near Beijing in less than 100 days, the Republic may receive another "batch" of infected. The president himself has not left the country since the beginning of the pandemic, using quarantine as the reason for his absence at the G20 meeting last weekend in Rome, as well as at the climate talks that are now starting in Scotland.

Perhaps his state of health really does not allow him to be infected – the official authorities are silent about this. Either this is an excuse to avoid discussing climate restrictions, since China has already suffered greatly as a result of the reduction in coal production. Perhaps next year, China plans to put some facilities back into operation – after all, taking into account energy prices, the Chinese have lost a lot on the reduction in coal exports over the previous two quarters.

The Chinese economy is under severe pressure due to anti-pandemic measures.

The expenses of the population have increased in comparison with incomes. Quarantine brings losses in almost all sectors of the national economy of the People's Republic of China - from cargo transportation, including maritime, to small businesses. Against the background of the mass withdrawal of high-tech companies from China, which can already be called an Exodus, the summing effect for the economy turns out to be deplorable.

But the price doesn't stop the government. It seems that it is now preparing unprecedented restrictive measures. On Tuesday, the Commerce Department advised residents to stock up on essential food and essential goods for the fall and winter to be ready for new outbreaks and new blockages.

What does this mean for you and me?

Firstly, there will be a shortage of many Chinese export goods and raw materials, which will contribute to an increase in prices for the final consumer. Markets will be especially sensitive to this shortage starting from Thanksgiving in the United States, which traditionally begins New Year's sales. The shortage of raw materials will lead to the fact that many Western manufacturers will be forced to reduce production.

If the massive spread of coronavirus in China does happen, it will affect the yuan exchange rate due to the impact on the economy. The yuan is the main currency of the Asian region. He alone is capable of dragging the entire world market with him, and the consequences will be much larger than with Taiwan in 1997.

Of course, this is an exceptional version of events. Investors are optimistic, although recently there has been a decline in interest in Chinese assets, not least due to the fact that the Chinese financial giant Evergrande is balancing on the blade of the guillotine.

However, someday China will have to admit the endemic nature of the coronavirus and learn to live with it. Will the state's healthcare system be ready for this event? It is not yet known.