Goldman Sachs sees holes in the Chinese economy as lockdowns spread

Another lockdown was imposed in China earlier today as covid cases there continue to spread. Huaxian residents were ordered to stay indoors with all businesses told to suspend operations.

That goes along lockdowns in Anyang, Yuzhou and Xian that already cover more than 20 million people. Outbreaks in Shenzhen, Hong Kong and Tianjin — with a combined population of more than 30 million — are also causing deep concern. Chinese Vice-Premier Sun Chunla called yesterday for tougher control measures in Henan — home to 100 million.

“In light of the latest Covid developments — in particular, the likely
higher average level of restriction (and thus economic cost) to contain
the more infectious Omicron variant — we are revising down our 2022
growth forecast to 4.3%, from 4.8% previously,” Goldman Sachs wrote in a report yesterday.

They see sagging consumption due to restrictions and the economy falling below the expected +5% growth target from Beijing.

The response from the PBOC and central government could be to push through more stimulus.