Assuming Shanghai can fully reopen by the third quarter, and barring another lockdown in a major city, the measures announced should stabilise China’s economy. But recovery is likely to be bumpy and GDP growth may only reach 4 per cent this year.
The impact of the lockdown on Shanghai itself might not be that great, but it still has significance for the future of China’s approach to Covid-19. Seeing Shanghai’s sophisticated strategy failing could lead those with fewer resources to return to large-scale lockdowns.
Even before Evergrande’s troubles, developers were taking steps to reduce leverage to meet new rules, a tightening of mortgage approvals had dampened housing demand and market concerns over default risks had led to higher financing costs.