FirstFT: China’s Covid restrictions compound economic pain

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China’s zero-Covid policy risks creating greater economic damage, experts have warned, despite the Omicron wave receding in several regions.

Covid-19 cases in six provinces, including Shanghai, Heilongjiang and Jilin, have fallen over the past seven days after many residents were prevented from leaving their homes for weeks, suggesting that the worst of the Omicron outbreak could be over for regions that were hit early. But even as cases wane in the most badly affected cities, authorities are still imposing intercity travel restrictions that are clogging up vital transport links between suppliers and manufacturers.

“The supply chain impact from this lockdown will be at least as bad, if not worse, than in spring 2020,” said Lu Ting, chief China economist at Nomura.

“Wuhan as an industrial base is not as important as Shanghai,” he added, explaining the city and the surrounding Yangtze River Delta area were home to the country’s automotive, semiconductor and textile industries.
Indeed, companies such as Volvo Cars have begun sourcing alternatives to its Chinese-made parts.

The founder and chair of one of Asia’s biggest private equity investors has criticised the Chinese government for policies that he says have resulted in a “deep economic crisis” comparable to the global financial crash.

“We think the Chinese economy at this moment is in the worst shape in the past 30 years,” Weijian Shan, whose group PAG manages more than $50bn, said in a video of a meeting viewed by the Financial Times.

• Opinion: China can’t lock down, hit its growth target, and stop buying growth with debt all at the same time, writes Robert Armstrong in his Unhedged newsletter.

Tell us what you think of China’s zero-Covid policy in our poll below. Thanks for reading FirstFT Asia. Here’s the rest of today’s news — Emily

The latest from the war in Ukraine

• US aid: President Joe Biden asked Congress to provide $33bn in additional security, economic and humanitarian aid for Ukraine, a sweeping request suggesting Washington is braced for a protracted conflict.

• Energy: The EU has warned European buyers of Russian gas that they will be in breach of sanctions against Moscow if they accept Kremlin demands for payment to be completed in roubles.

• Nato: Jens Stoltenberg, secretary-general of Nato, said he was confident the transatlantic security alliance would be able to provide security “arrangements” to protect Finland and Sweden if they were to join.

• Mercenaries: More than 1,000 Syrian and Russian mercenaries from the Kremlin-backed private military Wagner Group have been moved from Libya to the front line in Ukraine, western and Libyan officials said.

Five more stories in the news

1. Apple beats supply chain issues and inflation as tech peers struggle Apple’s services division posted record revenue in the quarter to March, pushing overall sales well beyond analysts’ expectations as it navigated supply chain issues and the highest inflation rate in decades. Intel, however, was hit by pandemic lockdowns in China and the war in Ukraine. Supply chain issues, elevated staffing costs and inflation also contributed to Amazon’s worse than expected performance.

2. Bank of Japan vows to keep bond yields at zero The yen fell to a new multi-decade low after the Japanese central bank defied a global shift towards higher interest rates and vowed to keep bond yields at zero. The yen fell 1.7 per cent to ¥130.62 against the dollar, its lowest level since the early 1970s in real terms.

3. Twitter admits overstating audience figures The social media platform admitted to overstating its audience figures by almost 2mn users for nearly three years, as it reported its first quarterly results since it agreed a $44bn buyout from Tesla chief Elon Musk. This is the second time that Twitter has miscalculated its user numbers, after discovering in 2017 that a similar error had gone unnoticed for three years.

Join us on May 4 for our subscriber only, Elon Musk Twitter Takeover Webinar. Register here for our free virtual briefing on the consequences of the world’s richest man acquiring the social media platform he describes as the “bedrock of a functioning democracy”.

4. Beijing grants first driverless robotaxi licenses Chinese regulators have given the green light to more robotaxis operated by online search company Baidu and Toyota-backed Pony.ai in Beijing. A safety supervisor must sit in the car — unlike in California which has granted licenses for fully autonomous cars — but does not need to be behind the wheel as in previous trials.

5. China pension reforms lure international investors Some of the world’s largest asset managers, including BlackRock, Goldman Sachs, JPMorgan and Amundi, are clamouring for a slice of the action after China announced plans this month to push more of the country’s vast pool of household savings into financial markets.

The days ahead

Earnings Results are expected from AstraZeneca, Chevron, Colgate-Palmolive, Danske Bank, Eni, ExxonMobil, Honeywell and NatWest.

China PMI data The Caixin general manufacturing purchasing managers’ index is set to be released on Saturday.

May Day The five-day May Day holiday will begin in China on Sunday.

What else we’re reading

On the hunt for oligarchs When the blow is delivered, it comes quick, polished and polite. Who are the corporate investigators who deliver legal summons to Russia’s richest? Lou Stoppard explores in this long read for the Weekend magazine.

Does Spotify face the same fate as Netflix? Over the past week, Wall Street and Hollywood have been consumed by Netflix’s share-price crash. None was hurt more than Spotify, which has tumbled nearly 25 per cent as the entire business model comes under scrutiny.

Saying ‘no’ to office housework Economist Lise Vesterlund has been struck by the number of male colleagues who were exceptionally good at teaching and writing research papers, yet could wriggle out of any type of service work — which was then picked up by women. It is these non-promotable tasks that are explored in a new book, The No Club.

Why did Wall Street loan billions to an alleged fraudster? Archegos’ Bill Hwang secured billions of dollars in financing from leading Wall Street banks with lies that ranged from assurances he could quickly exit his positions to claims he had large holdings of easily traded stocks such as Apple and Google, according to US authorities.

The UK’s race to woo the crypto industry In 2019, the impression that Britain was not receptive to cryptocurrencies was reinforced by a ban on retail trading of crypto derivatives. But the Johnson government is now warming to the digital asset world.

• Opinion: It may be the latest political and financial obsession, but cryptocurrencies remain something with no inherent value, writes Jemima Kelly.

Fashion

Bella Hadid’s style typifies the specific fashion moment we are living in. After years dominated by oversized streetwear, muted utilitarian clothes and covered-up minimalism, the fashion pendulum is swinging back towards clashing colours and prints, skintight dresses, low waists and glamour.