The Chinese economy is in a bad state and may remain so for some time.

China – The world’s second-largest economy is struggling with the effects of a severe drought, and its vast real estate sector is suffering from the effects of too much debt. But the situation is being exacerbated by Beijing’s strict zero-spread policy, and there is no sign that this will change this year.

Over the past two weeks, eight metropolitan areas have been completely or partially closed. Together, these vital centers of production and transportation are home to 127 million people.

China is facing serious economic problems. Growth has stalled, youth unemployment is at an all-time high, the housing market is collapsing, and companies are struggling with persistent supply chain problems.

At least 74 cities across the country have been closed since the end of August, affecting more than 313 million residents, according to CNN’s calculations based on government statistics. Goldman Sachs calculated last week that lockdown-hit cities account for 35% of China’s gross domestic product (GDP).

The latest restrictions demonstrate China’s uncompromising attitude towards eradicating the virus with the strictest control measures, despite the damage done.

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“Beijing appears willing to absorb the economic and social costs that stem from its zero-Covid policy because the alternative – widespread infections along with corresponding hospitalizations and deaths – represents an even greater threat to the government’s legitimacy,” said Craig Singleton, senior researcher China officer. at the Foundation for Defense of Democracies, a DC think tank.

For Chinese leader Xi Jinping, maintaining that legitimacy is more important than ever as he seeks to be elected to an unprecedented third term when the Communist Party convenes in its most important congress in a decade next month.

The economy will continue to deteriorate in the next few months, said Raymond Jung, chief economist for Greater China at ANZ Research. He added that as the party convention approaches, local governments will be “more inclined to prioritize Covid zero and suppress virus outbreaks.”

Tighter Covid restrictions will hit consumption and investment during China’s Golden September and Silver October, traditionally the peak season for home sales.