Chinese equities fall as Shanghai lockdown squeezes supply chains

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Electric carmaker Nio led Chinese markets lower on Monday as traders grappled with severe supply chain disruptions in China caused by authorities cordoning off Shanghai from the rest of the country.

Nio fell as much as 14.4 per cent in morning trading in Hong Kong after saying at the weekend that suppliers in Shanghai, neighbouring Jiangsu province and Jilin had suspended production “one after the other” and that it would postpone deliveries.

The Hang Seng China Enterprises index was down 3.2 per cent and China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed shares shed 2.7 per cent.

The market falls signal the rising financial and economic impact of a wave of lockdowns across China and especially in Shanghai, the centre of the country’s worst coronavirus outbreak in two years that has become a test of Beijing’s zero-Covid policy.

Disruptions to Chinese supply chains have intensified following the complete lockdown of the financial centre since April 1, exacerbating strains on transport and logistics as stringent measures have brought activity in China’s largest onshore financial hub and biggest city to a grinding halt.

“Shanghai is economically important for both China’s domestic economy and trade with the rest of the world,” said Johanna Chua, head Asia economist at Citigroup. She added that wait times for semiconductor deliveries had already increased and that “with Shanghai’s significant trade links to East Asia, this could have spillover impacts on regional supply chains”, particularly in South Korea, Taiwan and Vietnam.

China reported more than 27,000 new daily cases, with the vast majority in Shanghai, according to official data. Authorities over the weekend indicated some communities in the city would be reopened if no cases were reported for 14 days but most of metropolis of 25mn remains under a strict lockdown that has prompted complaints over access to food and medicine.

The southern city of Guangzhou said over the weekend that it would also begin mass testing its 18m residents after new cases were reported.

Zhenro Properties Group, which became the latest Chinese property developer to default over the weekend, blamed its missed bond payments on the “unforeseen scale and duration of lockdown in Shanghai”, which it said halted some operations and delayed both sales and asset disposals.

Inflation data released on Monday showed consumer prices rising almost 1 per cent from a year ago, driven mainly by a jump in fuel costs and food prices.

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