The Day at a Glance | September 1 2022

The Top

*China locks down 21 million in Chengdu, capital of Sichuan, amid COVID outbreak.

*Biden Administration considers implementing restrictions on chip and technical equipment exports to China for their manufacturing. 

*Russia assesses the purchase of 70 billion dollars in “friendly” currencies, like the Yuan, in order to diversify reserves and face economic sanctions.

*Banxico cut its 2022 growth estimate (2.2%); it also cut its 2023 forecast (1.6%); it maintains its inflationary estimates (8.1% 2022; 3.2% 2023).

*Taiwan shot down a Chinese drone close to the Kinmen Island and revived fears of an escalation in geopolitical tensions.

*South Korea´s trade balance logged a record deficit in August (9.5 billion dollars) due to high energy prices and a depreciated Won.

Economic environment

Quarantine measures in China. Chinese authorities have announced a total lockdown in the city of Chengdu, capital of the Sichuan province, as part of its zero COVID-19 tolerance policy. This is the largest quarantine since Shanghai was isolated at the beginning of the year in order to contain the virus, considering that Chengdu is home to 21 million people, represents 1.7% of China´s GDP, and is the headquarters for important international technology (Foxconn) and automotive (Volvo) companies. The city is also an important tourist center because of its panda bear sanctuary. The quarantine measure was announced on Thursday after 157 new COVID-19 cases were recorded in the city. The city´s inhabitants must get tested for the virus in the next 4 days, but authorities have not said how long the quarantine will last. The economic impact will depend on how long the quarantine lasts, with risks of persistent effects on production chains and manufacturing production. The quarantine´s announcement has caused panic buying, a phenomenon that has brought inflation in food prices in other cities; in addition to decreasing consumer confidence. It´s feared that the virus´s spread may force similar measures to be carried out in other Chinese cities in the following days: COVID-19 cases in Shenzhen doubled in the last day and quarantine measures may be implemented there as well. It´s believed that gatherings held indoors amidst high temperatures may be the cause for the increasing infections. Constant lockdowns among businesses and activities in China worsen the global growth outlook. Raw material prices have been the most affected by the news.