China’s Great ‘Zero-Covid’ Guessing Game

It’s the big economy Guessing game on China: When will the Chinese government give up uncompromising How to approach Covid-19?

Companies and Producer of worry about their profits, while uncertainty swinging in the financial markets. Global leaders and policymakers are weighing Beijing’s moves as part of their own growth calculus, given China’s central role in the global economy.

The answer belongs to one man – the country’s top leader, Xi Jinping. His words are more than that inviolable since securing a precedent-defying third term at the Communist Party congress late last month, where he stacked his leadership with loyalists and set an agenda that shakes global assumptions about the trajectory of the world’s second-largest economy.

The lack of visibility into his thinking has led the world to try to analyze whether the slightest signals could indicate that the government is adjusting its “zero-Covid” policy to limit the harm to the economy. or not. After the congress, China’s financial markets plummeted due to concerns about Xi’s power play. Soon after, speculation about the easing of Covid restrictions sent them soaring.

Every day seems to bring new different data points to the market to digest. Lower-level health officials urged less drastic enforcement of existing measures, while senior officials repeated that they were still taking action.

The authorities are facing a dilemma. Nationwide, the number of daily cases is at a six-month high, with China reporting more than 8,100 new infections a day. In normal play, officials are resorting to longer lockdowns and costly mass testing to try to contain the contagion.

And in China, nothing will be certain until Mr. Xi stops declaring “zero Covid” or explicitly declares that the country is changing course.

In a world surrounded by war in Ukrainesoaring inflationary and growing fear of a the global economic downturnChina could be a bright spot for growth. While most countries coped with widespread infections and mass deaths in the first year of the pandemic, China controlled the virus mainly with rapid lockdown and quarantine measures, and strong economic growth compared to the rest of the world.

As new Covid variants have proven to be milder and vaccines have become more common, the rest of the world has moved away from strict policies. China has stuck with the same heavyweight approach, concerned that a large number of deaths could be accompanied by a change of policy, and reluctant to import stronger foreign vaccines.

With each new outbreak and contagion of Covid-19, uncertainty grows about how and when Xi will roll back his pandemic policy.

Jude Blanchette, a China expert at the Center for Strategic and International Studies, said: “China has this boot on the base of economic activity, and we’re past the point where the boot has. meaningful. “The point is, the most authoritative voice keeps repeating the same thing.”

Easing Covid policy is important for the economy. People are staying at home, fearing that they might cross the street with someone infected and be sent to a long-term isolation ward under strict protection. China continues to isolate not only those who are sick with Covid but also anyone who comes into contact with them. Many shops and eateries have closed.

The world’s largest iPhone manufacturing complex in the north-central Chinese city of Zhengzhou shut down operations in mid-October and again this month. Some staff members escape base of 200,000 workers with stories of food shortages flooding the internet. Apple this week warned that its sales will not be as expected because of drastic measures.

The latest Covid alert and situation in China, described by one analyst as “an absolute punch” to the company ahead of the most important holiday season.

At times, China’s financial markets don’t seem to connect with reality. Investors hoping for a change in policy are flocking to any information, usually rumors or thinly sourced reports, that sends the market on a roller coaster ride.

Rosy’s report from Wall Street banks, which points to the chance of a reward when China opens up, has also helped fuel the protests. A report from Goldman Sachs this week predicts Chinese stocks could rise 20% “after (and before) reopening” from the pandemic.

Usually, investors are catching on to official signals, even if the Chinese government doesn’t really reveal much. For example, at a press conference last Saturday in Beijing, senior health officials announced that they were “unwaveringly” committed to zero-Covid policies, but there was a reason.

While much of the country remains committed to the zero-Covid strategy, there are signs that this approach is reaching its limits. Financial pressure is weighing on local governments that are running out of money to pay for Covid control measures like mass testing. The social costs are also rising as more and more people are trapped in prolonged detention, Anger, disappointed and dissatisfied to slide through internet censors.

Authorities have been quietly responding to some outrageous behavior, including an inspection of neighborhood guards who use violence to enforce restrictions. Police at a community in Shandong province announced on Tuesday that seven guards there had been arrested for hitting and dragging people, in a statement that quickly went viral on the Chinese Internet and was uncensored.

Officials are also making small suggestions that they might consider a new approach if medical advances can ease the pressure on China’s healthcare system.

The city of Shanghai recently started offering a new inhaled Covid-19 vaccine developed by Chinese pharmaceutical group CanSino Biologics, which officials say could significantly boost immunity. and attract a part of the people who are still hesitant about vaccines. More than a dozen cities are expected to make the vaccine available soon.

Two Chinese pharmaceutical companies are close to getting approval technology-based mRNA vaccine first developed and approved in the United States. China has also made progress in drafting distribution agreements with foreign pharmaceutical companies, and developing and acquiring Covid treatments, including antiviral drugs. homegrown.

Citing such developments, Zeng Guang, a former epidemiologist at the Chinese Center for Disease Control and Prevention, told investors last week that the conditions for China to open up and relax Policy looseness is being improved. His comments, made at a private investor event hosted by Citigroup, went viral online and fueled the resurgence of financial markets. A Citi spokesman declined to comment.

Richard Harris, managing director of Port Shelter Investment Management in Hong Kong, said for investors, it was difficult to tell if these small signals would translate into a broader easing of Covid controls.

“They are trying to play both sides at once without giving in to the central cause, which is the Covid-zero policy,” he said.

Many investors are sitting on the sidelines waiting for more concrete evidence.

Winston Feng, portfolio manager at MassAve Global, said he is looking into how authorities in the southern city of Guangzhou are handling the spike in cases in recent days. Last year, officials responded with relatively few cases of severe restrictions on people’s movement, sending robot trucks carrying food into beleaguered counties. This time, he said, officials have issued requests for mass testing but have so far avoided a citywide lockdown.

“The nuance here is the level of testing being conducted,” Feng said, adding that he expected China to take small measures to reopen but also impose restrictions. new restrictions if necessary to control local outbreaks.

“There will be moments,” he said, “when you feel like you’re taking two steps forward, one step back.”

Zixu Wang and Li You Contributing research.


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