Coronavirus: China’s Delta outbreak forces economists to rethink 2021 GDP growth forecasts, as trade expos cancelled
and Amanda Lee in Beijing
Published: 8:30pm, 10 Aug, 2021
More economists have moved to slash their economic outlook for China as the Delta variant spreads across the world’s second biggest economy, forcing the closure of restaurants and entertainment venues and the cancellation of numerous high-profile trade events.
The highly-infectious coronavirus mutation has grown quickly since an outbreak in Nanjing last month, leading to tightened control measures in many provinces and raising fears of a further slide in consumer spending.
“This wave of outbreaks has significantly increased the downward pressure on the economy,” Liang Zhonghua, chief macro analyst at Haitong Securities, said in a note on Sunday.
Analysts from ANZ Research said on Tuesday they were likely to revise down this year’s gross domestic product (GDP) growth forecast from 8.8 per cent if strict control measures continued into September.
A severe Delta outbreak and long-lasting lockdowns like those seen at the beginning of 2020 could subtract 12 per cent from the level of the country’s GDP in the third quarter, or 3 per cent from annual GDP output, Standard Chartered economists said in a note on Monday.
The possible downgrades follow a move by Goldman Sachs on Sunday to axe its quarterly growth forecast to 2.3 per cent from 5.8 per cent for July-September, and trim its full-year forecast to 8.3 per cent from 8.6 per cent.
“A new round of Covid-19 outbreak caused by the Delta variant since mid-July is posing the biggest challenge in more than a year to the Chinese government,” Bank of America Securities said in a note last Friday.
The warnings reflect growing concern that China’s zero-tolerance approach to the Delta variant could cause more economic harm than good, sparking a debate among analysts and experts on whether Beijing should begin to adjust its strategy.
“While short-and-sharp lockdowns worked well for China at the outset of the pandemic, the higher transmissibility of the Delta variant means that [parts of] China could get stuck in more persistent lockdowns than last year. The impact on Chinese demand could thus be heavier than last year,” Deutsche Bank said in a note earlier this week.
The cost of China’s zero-tolerance strategy was further isolation and blows to the tourism and dining sectors, said Zhang Zhiwei, chief economist at Pinpoint Asset Management, in a note on Sunday.
Beijing, however, seems intent on sticking to the hardline policy of eliminating Covid-19 infections. Former Chinese health minister Gao Qiang said the country should stick to the goal and stay away from “living with the virus”.
After a cluster emerged at an airport in Nanjing on July 20, the highly contagious Delta strain has spread to dozens of cities and more than a dozen provinces.
Mainland China recorded 181 new Covid-19 infections on Monday, including the highest daily totals of local and symptomatic cases during its recent outbreak.
All 31 Chinese provincial-level authorities have issued travel warnings, and much of the country – even areas free from the new strain – have reimposed restrictions on entertainment activities and large-scale gatherings
As a result, numerous fairs and conferences scheduled for August have been cancelled.
The 2021 Beijing Cyber Security Conference, which was set to run this week and expected to attract more than 50,000 visitors, was called off after municipal health authorities in the capital ordered the postponement of all large-scale exhibitions this month.
The third annual World 5G Conference, a mobile internet industry gathering expected to take place in a 215,000 sq ft exhibition centre in Beijing, was also abandoned.
Shanghai, an aviation manufacturing hub in China, has been forced to cancel two key aviation exhibitions this month and next, as it grapples with disruptions caused by the Delta outbreak.
The Shanghai New International Expo Centre has delayed 21 events in August, including the Aerospace Engineering Exhibition expected to open last Friday.
The Shanghai International Commercial Airshow has also been postponed.
No updates have been issued for flagship events organised by the central government, including the China-Arab States Expo this month in Yinchuan, the China International Fair for Investment and Trade in Xiamen and China International Fair for Trade in Services next month.
So far, 34 large exhibitions across the country have been postponed since August 5, according to the industry portal CNENA.COM.