Historic protests across China over its zero-COVID policy battered U.S. stocks on Monday, highlighting a close link between the contentious Chinese measures and domestic economic conditions that could help determine whether the U.S. enters a recession.
Residents in isolation in some regions say they’ve gone without sufficient food or medical care. Meanwhile, protests flared up after a fire on Thursday in an apartment building in the northwest city of Urumqi that killed at least 10 people, as some alleged that lockdowns obstructed the rescue of victims, while government officials denied any such impact.
Tension over COVID lockdowns in the world’s second-largest economy coincides with a precarious U.S. economic outlook.
An aggressive series of interest rate hikes from the Federal Reserve aim to dial back sky-high inflation by slowing the economy and slashing demand. But the approach risks tipping the country in a downturn and putting millions out of work. Plus, ongoing disruption from the Russia-Ukraine war has exposed vulnerability in economies across the globe, including the U.S., experts said.
COVID lockdowns in China have clogged supply chains in the manufacturing stalwart, extending pandemic-era bottlenecks that have contributed to inflation, analysts told ABC News. Meanwhile, the zero-COVID policy has stagnated the Chinese economy, hurting spending among Chinese customers and in turn pummeling U.S companies that depend on it, they said.
“When consumers are locked down in these different cities, it’s a gut punch to the U.S. economy,” Dan Ives, a managing director of equity research at Wedbush, an investment firm, told ABC News. “It has reached a fork in the road.”
Here’s what you need to know about how China’s zero-COVID policy heightens the risk of a U.S. recession:
Zero-COVID policy contributes to US inflation
A key threat to U.S. economic performance is inflation, which remains highly elevated and owes in part to Chinese lockdowns.
Sky-high price hikes stem from the pandemic, when millions across the globe facing lockdowns replaced restaurant expenditures with couches and exercise bikes. But the surge in demand for goods far outpaced supply, as COVID-related bottlenecks slowed delivery times. When demand exceeded supply, prices skyrocketed.
Some supply bottlenecks have eased but others remain, including China’s zero-COVID policy and its related lockdowns.
