China’s stringent Covid curbs threatens to derail world’s emerging markets

 Fresh Covid outbreaks are spooking global investors who fear shutdowns in China will echo across the world by lowering demand and disrupting supply chains

A widespread selloff in China is rippling through emerging markets, threatening to snuff out growth and drag down everything from stocks to currencies and bonds. Fresh Covid outbreaks — and the government’s stringent policy to contain them — are spooking global investors who fear shutdowns in China will echo across the world by lowering demand and disrupting supply chains. That’s pushing them to sell not just China’s currency, bonds and stocks but the assets of any developing nation which relies heavily on trade with the second-biggest economy.

The result is the sharpest slide in emerging markets in two years, not unlike the meltdown in 2015 when China’s woes led to a rout in their bonds and currencies, besides wiping out $2 trillion from equity values. Since then, the country’s influence on the global economy has only grown: It’s now the largest buyer of commodities, meaning its slump may impact exporters of raw materials and their markets more than ever. “Given China’s importance in global supply chains and importance to global growth prospects, further disappointments in the nation’s growth may lead to more contagion risk,” Johnny Chen and Clifford Lau, money managers at William Blair Investment Management in Singapore, wrote in an email. “We see countries with high trade linkages to China as being the most vulnerable.”…