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China's Zero-COVID Stance Poses A Bigger Threat To Firms Than Inflation, Says Report

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China's Zero-COVID Stance Poses A Bigger Threat To Firms Than Inflation, Says Report

This report does not constitute a rating action.

HONG KONG (S&P Global Ratings) Sept. 20, 2022--China's zero-COVID policy poses a greater threat to corporates than inflation. S&P Global Ratings believes the recovery among Chinese firms will be prolonged while the country struggles to balance growth goals with its stringent stance on managing the pandemic.

This is according to a report we published today, titled, "China's Zero-COVID Stance Poses A Bigger Threat To Firms Than Inflation."

"While the rest of the world is fixated on inflation, China's focus remains squarely on the pandemic. Yet, ever-more transmissible variants are colliding with its commitment to eradicate the disease from the country," said S&P Global Ratings' Greater China Country Lead Charles Chang.

"The economy staged a sharp recovery from the first COVID wave in 2020, but this year, the recurring cycles of outbreaks and lockdowns delayed the recovery of localities and firms and compounded the country's property crisis," said Mr. Chang.

Diminished mobility also impeded Beijing's ability to roll out stimulus."Although more stimulus is likely underway, and at a large scale, we expect its effectiveness to be substantially stunted as long as zero-COVID remains the country's core pandemic strategy," said Mr. Chang.

The effects pose a particular risk to sectors reliant on mobility and consumption. This includes business and consumer services, media, entertainment and leisure, real estate, and transportation cyclicals.

Government efforts to resolve supply-chain blockages have helped freight volumes normalize this year. However, personal mobility remains well below par--passenger volumes are down 25%-50% year on year.

China, unlike most countries, does not believe it faces a significant inflation problem, as indicated by two cuts to policy rates so far this year.

"As producer prices decelerate, the greater threat to corporate outlook will come from zero-COVID's hit on the top line, not inflation's squeeze on the bottom line," said Mr. Chang.

The report is available to subscribers of RatingsDirect at If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to Ratings information can also be found on S&P Global Ratings' public website by using the Ratings search box located in the left column at Members of the media may request a copy of this report by contacting the media representative provided.

Greater China Country Lead:Charles Chang, Hong Kong (852) 2533-3543;
Media Contacts:Michelle Lei, Beijing + 86 10 6569 2961;
Richard J Noonan, Melbourne + 61 3 9631 2152;

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