China’s Shenzhen closes electronics market due to COVID

Yahoo Finance anchors discuss how China's zero-COVID policy is affecting its electronics market.

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AKIKO FUJITA: Well, let's turn our attention to overseas here. China's technology hub of Shenzhen is shutting major electronics wholesale market [INAUDIBLE] [? Bay ?] to curb an outbreak of COVID-19. Three key buildings in the area will stay closed until September 2.

And Brian, we're, of course, highlighting this because Shenzhen is a massive tech hub. When you think about the area, nearly 18 million people there. COVID cases, nine reported. Nine symptomatic and two asymptomatic. And then here we are talking about closures.

It's an area that's largely avoided, these closures, until now. So it could have, you know, still early to say, but could have a significant impact.

BRIAN CHEUNG: Yeah, and the closure, I mean, September 2 is just the end of this week, right? But of course, it's just a reminder to everyone that the experience that they had in the beginning of the year and how crippling that was for their economic growth, we've seen the numbers, has not dissuaded the Chinese government from abandoning that zero-COVID policy.

With nine cases, they're still enforcing these extremely stringent lockdowns. I mean, it's very clear that they are staying the course on that policy. But look, at the end of the day, this has macroeconomic ripple effects.

You know, I was talking with Gita Gopinath over at the International Monetary Fund on Friday in Jackson. And she was saying that the China story with the shutdowns but then also the implications with whether or not there could be some other bubble brewing there with the, you know, inflating property sector, high leverage in that sphere of the world.

That's a serious weigh down not just on Chinese growth, but on global growth as well. 3.3% is their expectation, which is a massive step down from their previous growth rates.

AKIKO FUJITA: Yeah, if you look at past downturns-- and well, we've sort of said this over and over, but China has kind of led the growth out of it. This time, China is seeing a significant pullback because a number of those factors you mentioned, what does that mean for global growth? I mean, that's gonna continue to be the big question.

But you know, I mean, we say this over and over, but Xi Jinping is not abandoning the zero-COVID policy. I mean, that is pretty much set. What I think is gonna be interesting to watch, though, is to see the backlash that's coming because we have seen it slowly brewing, the anger at the very ground level.

Obviously, you know, what's the impact, you know, from an economic standpoint? You know, hard to say. But I do think that that's something that he's keeping a close watch on, especially with him trying to seal that third term.

BRIAN CHEUNG: Yeah, and last point, you know, I mean, you mentioned, Shenzhen, specifically, is such a tech hub in the south of China. It's essentially there Silicon Valley. Very high concentration of those young employees who are really driving a lot of the innovation in China and productivity.

If you see shutdowns in that region, that could further exacerbate the trend that we've already been talking about, which is high youth unemployment and just a general cultural shock. That is a dissuasion of, you know, the Chinese policies with your prime years in your 20s--

AKIKO FUJITA: Yeah.

BRIAN CHEUNG: --being stuck inside your apartment.