The Chinese economy will face another big hit as the country sticks to its zero-Covid strategy. Subsequently, the yuan faces notable downsides risks over the coming weeks, economists at Commerzbank report.

The lockdown pains

“There is little sign that the virus could be contained any time soon as the new local cases are still on the rapid rise, particularly in Shanghai. Hence, the Chinese authorities are facing a struggling balance between virus containment and economic pains.” 

“As Shanghai plays an important role in the entire Chinese economy, it makes sense to hold a very cautious view on economic prospects. Obviously, this implies a visible downside risk for the Chinese currency over the foreseeable future.”