The extended lockdown in Shanghai and other cities have shattered market confidence, sending Chinese equity market down again over the month. Taking into account the damage of the zero-Covid policy to the Chinese economy, we expect a recession in Q2 and full-year growth to undershoot the government target by a wide margin (Amundi forecast 3.5% versus the 5.5% official target).
Nevertheless, a simple extrapolation of Shanghai’s case would be wrong. Despite the fact that one fourth to one third of the economy is under various levels of restrictions, activities outside of Shanghai have started to recover since early April, heralding an adjustment of policy execution and a gradual reopening in May/June.
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