Assuming positive cases in most parts of Shanghai and testing for the virus for most of the month, that would mean most of the economic activity during the month will disappear and the factory will not function properly.
As for office work, especially those in the financial sector should be fine, as most employees can work from home, but it’s uncertain if they can work as usual in quarantine facilities, where internet connections may be poor.
In addition, because the authorities have very strict measures to prevent the spread of the virus, an infection by one person might affect the staff of an entire factory. In terms of terminals, if one person is found to be infected, the port will also suspend operations for disinfection.
ING expects that the local government and the central government should introduce some relief and stimulus measures, which should bring regarding a 1% to 1.5% stimulus to GDP. However, the bank added that the timing of the measures is crucial, as it is not yet clear what the authorities will introduce, and the implementation needs to be seen before the impact can be assessed. But the bank is confident that central government measures, such as export tax rebates, will not be rolled out too soon.
The bank expects that the People’s Bank of China will cut the reserve ratio by 50 basis points in the second quarter to support small and medium-sized enterprises; in addition, if the People’s Bank of China cuts interest rates, the rate is expected to be 20 basis points.
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