China's COVID Resurgence Causes 'Zero Growth' Shock... Global Economic Supply Chain Risks

Sharp Increase in Confirmed Cases in Major Cities Including Shenzhen... 5,154 Cases Confirmed on the 14th
'Prevention Over Economy' Policy Leads to Repeated Lockdowns in IT and Auto-Centered Cities
Morgan Stanley Lowers Q1 Growth Forecast from 0.6% to 0%
Economic Slowdown Concerns Cause International Oil Prices to Fall Below $100 Intraday, Stock Market Plummets

Residents of Shenzhen, China, lined up on the 14th (local time) to undergo COVID-19 testing. As the Omicron variant spread, Shenzhen issued a stay-at-home order and locked down the city on that day.
[Photo by AFP Yonhap News]

[Asia Economy Reporters Byunghee Park, Hyunjin Jung] There is a forecast that China, the engine of the global economy, will record zero growth in the first quarter of this year. This casts another shadow over the global economy, which is already facing concerns of stagflation due to inflation and the war in Ukraine.

On the 14th (local time), U.S. investment bank Morgan Stanley pointed out that the Chinese government is prioritizing COVID-19 prevention over the economy and lowered its forecast for China's first-quarter economic growth rate from 0.6% to 0%, Bloomberg reported on the same day. Morgan Stanley also lowered its annual economic growth forecast for China this year from 5.3% to 5.1%, which is significantly below the Chinese government's target of 5.5%.

Recently, the highly transmissible Omicron variant has rapidly spread in China, increasing uncertainty about the Chinese economy. The number of new daily confirmed cases rose from just 224 on the 1st to 5,154 on the 14th.

The Chinese government is sticking to its zero-COVID policy, which aims for an almost impossible target of zero infections, putting a burden on the Chinese economy. On the same day, Shenzhen, the center of China's IT industry, announced lockdown measures, causing Foxconn to halt factory operations.

Shanghai, the economic capital of China, also strengthened quarantine measures to a quasi-lockdown level, including suspending in-person classes at schools. Since Shanghai is a global logistics hub, stricter lockdown measures could exacerbate supply chain disruptions. Changchun, the capital of Jilin Province and the center of China's automobile industry, already implemented lockdown measures last week, resulting in a complete shutdown of operations at five automobile manufacturing plants.

Morgan Stanley explained that these lockdown measures clearly show that the Chinese government is prioritizing COVID-19 prevention over the economy, which is the reason for the downward revision of the economic growth forecast. If the Chinese economy, South Korea's largest export partner, stops growing, it will inevitably deal a direct blow to the South Korean economy.

Concerns about the slowdown of the Chinese economy are growing, raising fears that it will be a negative factor for the global economy as well. International oil prices, which had risen to $139 earlier last week, fell below $100 during intraday trading.

The New York stock market closed lower amid weakness in China-related stocks. The Nasdaq index plunged 2.04%, and the Nasdaq Golden Dragon China Index, which reflects the stock prices of 95 China-related companies listed on the New York Stock Exchange, plummeted 11.73%. On the 15th, the Hang Seng Tech Index, which reflects major tech stocks such as Tencent, Alibaba, and Baidu on the Hong Kong stock market, opened at 3,569.09, down nearly 6% from the previous day.

This content was produced with the assistance of AI translation services.