China: Yuan falls again amid news of riots over Covid zero policy
The news of the demonstrations and riots against the lockdowns due to the Covid zero policies, which do not stop the normal infections exceeding 40,000, are starting to have an effect on the economy. The offshore yuan depreciated nearly 1% to surpass 7.2 per dollar in early Monday morning as protests in China over Covid restrictions dented risk appetite. A social media video showing a woman screaming into a burning skyscraper in Urumqi, capital of the Xinjiang region, has sparked a wave of protests in major cities, including Shanghai and Beijing. The yuan jumped to a two-month high earlier this month after Chinese authorities took a targeted approach, reducing quarantine periods and backtracking on testing. But optimism lasted shortly after daily infections of the virus hit new records, forcing local authorities to re-impose restrictions. Here is the related graph
The Shanghai Stock Exchange lost 2.1% bringing the loss in one year to 23%. Adding fuel to the fire was the news that in the first ten months of 2022, profits of Chinese industrial enterprises decreased by 3.0% year-on-year, reaching CNY 69.78 trillion, a larger decline than in 2022, 3% from the previous period, in a context of COVID infections at record levels, with a growing number of cities imposing severe restrictions, weakening consumption and a deepening housing crisis.
We haven't seen demonstrations of this magnitude, widespread in all major cities, from Shanghai to Urumqi to Beijing to Wuhan, since the 1980s. For now, the police have reacted in a controlled way, although this does not mean that there have not been many violent arrests.
Even non-critical Chinese newspapers, such as the SCMP, are starting to wonder if with 40,000 cases on the rise, a real record for Beijing, it is still possible to think of lockdowns and mass PCR tests and zero covid policy, or if we should switch to more targeted policies aimed at safeguarding the elderly, letting the virus spread and weaken the population. Also because the economic cost of the policy is becoming too high and presumably cases will continue to increase. Among other things, the protests, which began against the lockdown policies, are spreading and affecting the whole system, with Xi Jinping in the lead. This paves the way for a violent crackdown that the country may not be able to afford.
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The article China: the Yuan falls again amid news of riots over the zero Covid policy comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/cina-lo-yuan-torna-a-cadere-in-mezzo-alle-notizie-di-rivolte-per-la-politca-covid-zero/ on Mon, 28 Nov 2022 09:00:01 +0000.