What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing the past year has undoubtedly been tough for china's economy. Since this summer, real city developers have been under severe financial distress with evergrand recently declaring bankruptcy in the fall, the country's overly ambitious plans to reduce their dependence on coal caused widespread power outages. These two issues prompted economists to drastically reduce their growth outlook for the world's second largest economy. President xi jinping is up for re-election as general secretary of the communist party in november of 2022.

If he wants to maintain his grip on power, he needs the chinese economy to make a turn around. But with some recent developments it looks like the situation in china will get a lot worse before it gets any better. Since the beginning of the pandemic, china instituted, perhaps the world's most extreme regime of testing, quarantining and travel restrictions. They completely locked down the city of wuhan for two full months with citizens not allowed outside their homes.

President xi jinping enforces zero tolerance, covert policy and was willing to incur just about any cost to completely eradicate the virus, and after a few months it looked like their efforts were paying off. They gradually started reopening the economy and people started going back to work. According to the officially reported statistics, the prevalence of new cases has dropped to a few dozen to at most, a couple hundred per day with a country's population sitting at 1.4 billion people. These coveted numbers basically round to zero.

It looked like china was leading the world in terms of coveted safety. They were the only country to completely eliminate the virus, but recently some regions of china have seen slight upticks in covid cases. This has spurred the government to implement a full-scale lockdown again in the city of xi'an, which 13 million people call home. The authorities have gone so far as to forcibly lock people into their homes 24 7, not even allowing them to go out for grocery shopping, with people unable to even go to grocery stores.

They are running out of food. Desperate residents have been forced to return to a barter economy with neighbors trading goods. In one case, a resident apparently traded their nintendo switch video game console for a small amount of food. The government says they are trying to bring more food deliveries to people under lockdown, but with 13 million people, essentially under house arrest.

This is much easier said than done. The disaster that is currently unfolding in xi'an exposes how unsustainable china's zero tolerance, coveted policy, is, if they're still doing full-scale lockdowns two years after the virus was first discovered. When will this ever end in this video, we'll look at the current humanitarian disaster going on in xi'an what it means for the chinese economy and whether china's lockdowns will ever end by the summer of 2020? China had pretty much reopened its economy after the draconian lockdowns. In the spring, everything was open for business, even high contact venues such as nightclubs, but even when cases fell to near zero, they continued to impose strict testing, tracing and quarantine controls.

They went as far as creating a coveted app which tracks your location. If you've traveled to an area, the government needs to be high risk. Your app will turn red and you'll be denied entry to stores, restaurants and even your job. With these measures in place, they could detect rhinovirus cases very quickly.

Whenever someone tests positive they're placed into a government-controlled facility to quarantine in some cases for longer than a month, they also ban travel from pretty much every other country to avoid importing covid cases. But even with the vast majority of foreign travel banned, there is still a little bit of contact at cargo ports, chinese citizens. Returning to the country and foreign diplomats. Given the amount of trade that china does with the rest of the world, there will inevitably be at least a few cases that pass through the cracks whenever even a single new case popped up, they locked down the neighborhood, not letting anybody out until they are tested.

Multiple times throughout the later half of 2020 and 2021, they were able to keep things under control by using these methods, while the neighborhood level lockdowns were annoying to local residents, the economy as a whole largely remained open. The problem is that over time, the virus mutates and now there's a highly contagious omicron variant. China has a high vaccination rate of 85 percent, while we don't have reliable data on the chinese vaccines. Their efficacy almost certainly decreases as the virus mutates similar to the western vaccines.

The chinese once significantly reduced the risk of severe hospitalization for the new variants. So, in a lot of cases, you can still get infected, but the symptoms will be mild, but when you're having a zero tolerance, covett policy, it doesn't matter if the patients are symptomatic. Just one positive test is enough to trigger a lockdown. This put china in a very unstable position, as new variants emerge, their vaccines become less and less effective.

This drastically increases the chances of a new outbreak in late december. That's exactly what happened in xi'an, a major city in western china, which is home to 13 million people for most of the past couple years. Their reported kofi cases have been zero or one per day, but starting around december 20th. It started increasing to dozens and then even more than 100 per day in most countries, having only a couple hundred cases for a 13 million population city would be considered extremely good, but in china this was an emergency level event, as it was the largest outbreak in The country since the original one in wuhan, the government almost immediately imposed draconian lockdown measures, they forcibly locked people inside their apartment complexes.

The only acceptable reason to go outside is for regular mass testing. In fact, more recently, residents are not even allowed to go outside for that government workers in full hazmat suits go door-to-door to administer people's daily covent tests. They apparently also use heavy furniture and other makeshift methods to lock apartment building doors from the outside effectively putting the residents under house arrest with people not allowed to go to the grocery store. Government workers are supposed to deliver food to people's homes.

However, building the infrastructure to deliver adequate food to 13 million residents overnight is almost impossible. Many people have gone days or even more than a week without the promised food deliveries, desperate just to eat residents have been forced to barter with whatever items they have with their apartment. Building neighbors residents have reportedly traded things such as cigarettes, cell phones and even nintendo switched consoles for food. In addition, to not being allowed to buy food residents are also generally not allowed to go to the hospital, even if they have immediate life-threatening conditions.

You have to have a pcr coveted test within 48 hours of going to the hospital, and even if you have a negative test result, they might still deny your entry. Obviously, if you're having a medical emergency you're not going to have the time to get a pcr test, for example, a man in xi'an was recently denied entry into a hospital. While he was having a heart attack. There is a good chance he could have been saved if he could get access to basic medical treatment, but with the hospital denying him entry, he tragically passed away.

Also, multiple pregnant women have been denied entry into hospitals and had no choice but to have a miscarriage on the street outside the hospital doors trying to perform childbirth under such conditions puts both the baby and the mother at severe risk. The humanitarian disaster is probably much worse than the limited reports we have. Access to. Dozens of citizens have already been persecuted for making social media posts and even private messages criticizing the lockdowns.

With the threat of prosecution looming over everyone's heads. It is likely that many atrocities are going unreported. It's not like the hospitals are over capacity. There have only been around 1600 coving cases in xi'an, with the vast majority of them having no or mild symptoms.

In the recent outbreak there has not been a single, coveted death, the hospitals are pretty much empty and they have more than enough capacity to treat anyone with life-threatening conditions. But if you show up to the hospital without the proper test or if your coved app is not working, they'll, just lock the doors, the central government blamed local hospital officials for these incidents and said that they should not deny emergency medical treatment. But the hospital workers are given an almost impossible job in an ambiguous case. They risk prosecution, regardless of what decision they make, if they admit a patient who doesn't have the proper documentation, they risk being disciplined for violating covet protocols and if they deny a patient who needs help, they risk being disciplined for this too, and they often have to Make these decisions in a matter of minutes with the government being so serious about kovid, it's almost impossible to know what the right thing to do is to prevent covenant from lingering on surfaces.

China sends armies of workers to the streets to spray copious amounts of bleach-based chemical compounds. Most health experts say that this practice has limited effectiveness in preventing the spread of the virus. It is unclear what the long-term public health effects are. Spraying thousands of tons of toxic chemicals into the air, but it is known to be an ecological disaster, as the gases kill, wild boars weasels and many species of birds, and the problem is not just limited to xi'an the city of yojo, which is home to about 1 million residents was recently put under a similar lockdown.

The important port city of ningbo is currently undergoing smaller scale, lockdowns, which are severely disrupting the port's operations and within the past few days, the economically important city of tianjin started a mandatory mass testing of all its 14 million citizens. If they find enough positive cases, they could easily find themselves in a similar situation as xi'an with the more transmissible omicron variant becoming the global dominant strain. China's zero tolerance policy is looking more and more unsustainable. If this type of lockdown can happen in xi'an with almost no notice, it could happen to almost any city in china, in addition to the tragic human cost.

There is also a significant economic cost. Millions of people who cannot work from home completely lose their incomes. Furthermore, critical factories are forced to shut down semiconductor giants. Samsung and micron both have factories in xi'an which are shut down.

These factories make dram and nand memory chips, which are vital components in computers, with the risk of lockdowns increasing many multinational manufacturing companies will start shifting their facilities outside of china. For example, the massive contract manufacturer of foxconn is rapidly ramping up its capabilities in india and vietnam to reduce their reliance on china. Foxconn is a company that assembles the iphone on behalf of apple. The point is it's very difficult for companies to make long-term supply chain investments when there's so much uncertainty around coveted restrictions in february of 2022, china will be hosting the winter olympic games.

3 000 athletes from all over the world will be entering china to participate, whether or not they're allowing spectators. When you add the international media teams and coaches, the total number of foreigners entering the country will likely be well above 5 000. They plan to institute a covent bubble where athletes are not allowed to leave the olympic village and will be tested every single day, but with so many people arriving. It would be absurd to think that not a single omicron case will slip through the cracks.

There is a growing consensus among scientists that code will be with us forever. Vaccines and treatments can dramatically reduce its severity and disruption to the economy, but we will still have to learn to live with it. If china continues to pursue its zero-tolerance coveted policy, it'll eventually reach a point of absurdity. Will they still be doing city-wide lockdowns in 2030? When will it ever end? China has already sacrificed hundreds of billions if not trillions, of dollars worth of economic output with its covert policies, and this isn't even considering the humanitarian crisis happening in the affected cities.

If they backtrack now, they'd basically be admitting that the prior zero tolerance policy was a failure, and all that sacrifice was for nothing. This would be incredibly embarrassing for xi, jinping and reduces power within the communist party. You can think of it as kind of like america's war in vietnam in the 1960s and 70s. After a few years, it was pretty clear that the americans underestimated the military capabilities of the north vietnamese and the war would be much more difficult to win than originally anticipated.

At this point, the best decision would be to give up and bring the troops home, but the politicians were trapped in a sunk, cost fallacy and ended up dragging out the war for 20 long years with millions of unnecessary deaths. At the end of the day, all that effort and death was a complete waste, as the north vietnamese ended up winning anyway, china is fighting its own vietnam war, with their enemy being the coronavirus, and it is a war that they will never be able to win. For good, the question is: how far are they willing to go before they finally give up alright guys that wraps it up for this video? What do you think about the recent lockdowns in china? How much longer do you think they can sustain their zero tolerance policy? Let us know in the comments section below as always. Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.