Widespread lockdowns continue to pressure demand as Covid cases at two-month high

China reported 691 new Covid infections on Sunday as the country struggles to contain ongoing outbreaks amid the continuing zero Covid policy. This is the highest number of daily cases since May 23rd. While May saw high daily case totals, those were primarily centered in Shanghai.

In contrast, the higher number of daily cases are spread throughout the country and will continue to have a widespread impact on economic activity and demand for agricultural products.

Chengdu, in southwestern China, announced that the city’s bars, gyms, primary and secondary schools would be closed. The city also announced that anyone leaving the city would need to have a negative Covid test result within the past 48 hours.

Shanghai added 17 new cases but reported all new cases were found in populations already locked down.

Local governments continue to try to stimulate the economy as consumption has been weak. Hubei announced 10m yuan in tourism coupons for residents. Hainan, a tropical province that is heavily dependent on tourism, announced 20m yuan of tourism coupons. This follows a three-week period where the government lowered taxes at duty-free shops in the province, but only saw a 5.1% y/y growth in spending.

Beijing’s city government announced another round of 100m yuan coupons for restaurants. This follows a previous round of 100m yuan of restaurant coupons issued on July 7th.

Macau extended its lockdown until Friday as the region has struggled to contain its largest outbreak to date. Neighbouring Zhuhai also continues to struggle with its extended outbreak with officials announcing that all restaurants would be shut. Additionally, officials announced that everyone in the city would need proof of a negative test result within the past 24 hours to use public transportation or enter apartment complexes.

In western China, Lanzhou announced that its lockdown would be extended. And border provinces like Guangxi, which neighbours Vietnam, also reported high case counts.

The widespread lockdowns and restrictions will continue to weigh on agricultural demand in China as consumers stuck at home continue to opt for relatively simple food items like noodles or rice.