After a strong month of gains, Chinese stocks are pulling back on news that lockdowns are once again hurting its economy.
The country’s capital city, Beijing, struggles to keep Covid under wraps as Thursday’s local infections rise to 1,800. That brings the monthly total to 10,000, prompting additional lockdown measures that will grind its economy to a halt. Road, subway, and other transportation use are down dramatically in Beijing and smaller cities.
Additionally, unrest continues at Foxconn plants where Apple iPhones are made. Roughly 20,000 workers, most of which were recently recruited, have left their posts over concerns about lockdowns and working conditions. They’ve also clashed with security personnel this week as tensions remain high. Many analysts expect this and other Covid-related conditions in China to weigh on supply chains further.
Meanwhile, China’s central bank is strengthening efforts to support its struggling property market, which makes up 25% of its economy. It plans to offer cheap loans to financial firms that buy bonds issued by property developers. It’s also drafting a list of good-quality and systemically important developers eligible for broader government support to improve their balance sheets.
The central bank is also reducing its reserve requirement ratio for banks by 25 bps beginning on December 5th. This frees up $70 billion for banks to support the country’s slowing economy.
We’ll have to see how this develops. But for now, tensions in the country are high. And global investors remain concerned.