On Monday, April 25, fears of further lockdowns saw China's benchmark share index record its biggest drop since February 2020.
The CSI 300 index, which shows the performance of the top 300 stocks traded on the Shanghai and Shenzhen stock exchange, fell by 4.9% to hit its lowest level since May 2020.
Panic over widening restrictions were sparked as parts of Beijing went into lockdown after officials discovered COVID had been spreading undetected, with more than 40 cases recorded over a three-day period.
The Beijing outbreak was discovered in Chaoyang, the city’s largest district by population.
Raw material producers, technology companies and industrial groups were the worst affected on the index, as lockdown measures will undoubtedly hit them hard.
Outside of China, London’s FTSE 100 share index, which includes the stocks of oil producers and mining companies, fell by 1.8% by the end of the day.
Bent crude oil prices fell by 4.7% to USD101.41 per barrel, as the industry predicts a fall in demand due to the new infections in Beijing.
Oil companies such as BP and Shell, as well as mining giants Anglo American, Glencore and Rio Tinto, were some of the biggest losers during yesterday’s dramatic fall in prices.
Prices of oil previously suffered when Shenzhen and other Chinese cities went into lockdown in March, subsequently decreasing demand.
Infections in Beijing now mean that the nation’s capital and its largest metropolis, Shanghai, are both battling COVID-19 outbreaks – which in China only means one thing: Lockdowns.
Lockdowns are a worry for many Chinese businesses. Restaurants, bars, cinemas, gyms and other recreational activities often have to cease operations.
Entering high-risk cities may require quarantine on arrival and or upon return to the city you came from, a huge obstacle for logistic companies.
The scale of the lockdowns that may be imposed on Beijing will ultimately depend on how the city deals with the current outbreak. Should they contain it to a small number of districts with minimal infections, a citywide lockdown could be avoided.
At the beginning of April, the city of Guangzhou managed to do just that.
Similar to Beijing, on April 8 Guangzhou discovered the Omicron strain of the virus had begun spreading throughout the city while officials and the public were unaware.
When it was discovered, lockdown measures were imposed and restrictions were put in place. The virus was largely contained to the Baiyun district and now, two weeks later, the city is almost entirely back to normal.
The world will continue to monitor the situation in Beijing, but should the capital be unable to contain the spread of the virus, it could have major effects on both China’s and the world’s economy.
[Cover image via Wikimedia]