Daily Brief: China Is Shooting Itself Squarely In The Foot With All These Lockdowns

Daily Brief: China Is Shooting Itself Squarely In The Foot With All These Lockdowns

almost 2 years ago3 mins

Mentioned in story

Data out on Tuesday showed China’s lockdowns are costing the country $46 billion every month.

What does this mean?

China was one of the biggest success stories of 2020, locking down fast to nip Covid in the bud and get businesses back up and running pronto. But while the rest of the world is now learning to live with the virus, China’s sticking to those no-Covid guns: the government’s been closing down cities from Shanghai to Shenzhen at the first sign of an outbreak. Thing is, economists are estimating that the country’s zero-tolerance policy will cut around 3% off China’s economic growth every month for as long as it lasts. And if stricter stay-at-home policies spread into towns across the country, that impact could double.

China Covid
Source: Bloomberg

Why should I care?

For you personally: What happens in China doesn’t stay in China.

The policy looks like it might already be taking its toll: data out this week showed that China’s manufacturing sector – a key driver of its economic growth – has grown more slowly this quarter than it did the same time last year. And if even more factories end up shutting down at the first whisper of the illness, manufacturing could end up stalling altogether. That would hit you too: China is the world’s biggest manufacturer, and any slowdown could push up the prices of your go-to products even more.

Lockdown cost
Source: Bloomberg

Zooming out: TikTok’s got competition.

China might be looking to less traditional sectors to prop its growth up going forward – namely its tech companies. And there are encouraging signs there, with video-sharing app Kuaishou reporting better-than-expected results on Tuesday. It boasted 22% more monthly users last quarter than the same time the year before, and will be hoping that its expansion into music and sports content will take that one step further.

Keep reading for our next story...

HP's Buying Video Conferencing Hardware Maker Poly

HP image

HP announced this week that it had agreed to buy video conferencing hardware specialist Poly, as the IT giant does its level best to keep rebooting with the times.

What does this mean?

Now that employers have firmly embraced hybrid working, HP’s customers are kitting out their offices with a host of new equipment to keep their teams connected. So the PC powerhouse is kitting itself out too, announcing that it’s buying Poly – seller of headsets, accessories, and more – in a deal worth $3.3 billion. That should help HP capitalize more fully on the remote working market, as well as help the company expand beyond PCs and printers to drive its long-term growth. It should work out well for Poly too: HP’s sheer size gives it a lot of sway with suppliers, which should help Poly clear a backlog of sales that’s apparently worth “hundreds of millions of dollars”.

Poly stock | Source: Google Finance
Poly stock | Source: Google Finance

Why should I care?

The bigger picture: Workforce solutions are the solution.

Before the deal, analysts were expecting Poly to grow its revenue by just 5% each year for the next few years. But HP believes it can turn that into 15% a year just by fixing Poly’s supply issues and improving sales, and ultimately make a tidy $500 million in revenue from the company by 2025. And why not: the “workforce solutions” market is worth $120 billion, and it’s ripe for the picking.

For markets: HP backs itself.

HP also reiterated its commitment to buying back at least $4 billion worth of its shares this year, which will reduce their supply and push up the price of those left over. And while some investors question whether it’s the best use of cash, others would beg to differ: plenty have already bought HP’s stock with the expectation that it’ll jump when the buyback happens. That might be why HP’s shares have outperformed both close rival Lenovo and the overall US stock market this year.

HP stock
Source: The Wall Street Journal, FactSet
Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG