Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

I received an email from a friend in Beijing earlier this week about how his days are consumed

with finding non-perishable food in preparation for a possible lockdown. He signed off the email with the line, we're undergoing an unbelievable time in Chinese history.

My friend told me of the three daily COVID tests required and that certain neighborhoods in Beijing

were already in lockdown. Beijing has since stepped up coronavirus restrictions

after reporting 41 cases last Sunday. The new wave of controls is the latest sign that

China's leadership is committed to their heavy-handed zero COVID policy. This despite

indications that the policy is causing huge economic damage, both

within the country and internationally. In late March of this year, Shanghai, the richest

city in the world's second largest economy, went into what was supposed to be a temporary

lockdown. By early April, 28 million people were confined to their homes and Shanghai was effectively

closed for business.

The Orwellian images were difficult to ignore, robots patrolling the city with loudspeakers

blaring directives for COVID tests throughout the day. At night, people were taking to

their balconies to shout in protest at the lack of essential supplies. Drones flew through

the city blaring messages like, please comply with COVID restrictions and control your soul's

desire for freedom. As the rest of the world is emerging from the pandemic two years after its onset, it's surprising

to see what's happening in China.

Economists are warning that the economic shock from these lockdowns could be more severe

than the shock that came in the aftermath of the Wuhan outbreak two years

ago. This is because of Shanghai's importance in global trade and manufacturing.

If three months ago someone had told you that within weeks the citizens of Shanghai would be

...