Opposition Against China’s Zero-CoVid Policy Starts to Reach the Global Scale

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People are waiting for the government’s response on the ripple effects the Chinese lockdowns have caused.

On December 4, 2022, news spread all over the globe that Chinese authorities are starting to consider loosening their CoVid restrictions. As a result, markets have spiked up. Chinese stocks in Hong Kong had their best week in over seven years, with industrial metals rising by up to 5%. The AUDUSD was the big winner, gaining nearly 3%.

However, China’s National Health Commission quickly denied the news. Instead, it was the other way around, and the said government agency said that the upcoming flu season might push them to have stricter restrictions.

Markets, however, appeared to ignore this statement and have been indifferent to the worsening situation as risk markets fought back stridently in November. However, the situation has begun to change, as opposed to the spread of lockdowns, culminating in two nights of protests in Shanghai over the weekend.

The Guardian reported:

“Chinese police have barricaded a street in Shanghai where protesters have gathered for the last two nights in anticipation of further rallies against the government’s rigid zero-Covid policies.

Since Friday, a wave of protests has spread across multiple cities in China, prompted by the death of 10 people in a building fire in Urumqi in Xinjiang. Much of the region had been under lockdown for more than three months, and people blamed the lockdown for the deaths.”

Protests are witnessed in different parts of China, including Zhengzhou, Chengdu, Beijing, and Shanghai. The government shut down a Foxconn factory because of activism. However, the weekend protests were massive enough that no brutal force could hamper them. 

We all know that civil disobedience is not common in China and how the authorities respond to the series of protests concerns the market. Most of the pressing is on President Xi. Markets will undoubtedly respond positively if he caves and eases policy, but this is a big ‘if’ for someone who rarely backs down. ING’s take on the market impact is as follows:

“China as local authorities struggle to battle rising daily case numbers and enforce lockdowns. While a disorderly exit from China’s Covid Zero policy could ultimately prove a positive for global demand, getting to that point will be an exceptionally bumpy ride for the world’s financial markets. As it stands currently, events in China are being read negatively for demand trends, where for example Brent crude and industrial metal prices are under pressure. “

Any protracted instability will undoubtedly benefit the USD while weighing on stocks, commodities, and the Australian Dollar.

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