Economists see faster reopening in China as Covid-19 curbs ease

Nine of the 16 economists surveyed by Bloomberg last week said China will reopen the country faster than they had previously expected. PHOTO: EPA-EFE

BEIJING – Economists are bringing forward their projections for China’s exit from zero-Covid as the government begins relaxing controls in many cities.

Nine of the 16 economists surveyed by Bloomberg last week said China will reopen the country faster than they had previously expected. Of those, four say it will happen in the second quarter of 2023, while three see it happening earlier.

The government has accelerated its shift towards reopening as it became evident its strategy of eliminating infections was failing to bring the current record Covid-19 outbreak under control.

The virus restrictions have caused widespread damage to the economy and fuelled protests in several major cities, prompting the authorities to roll back some mobility curbs in recent days.

“We believe China has already exited its zero-Covid policy with those 20 fine-tuning measures and is trying to flatten the infection curve instead,” said Mizuho Securities senior China economist Serena Zhou.

The 20-point guideline published in November sought to make Covid-19 controls more targeted and less damaging to economic activities.

Beijing is now allowing some low-risk patients to isolate at home instead of in quarantine camps. The financial hub of Shanghai scrapped polymerase chain reaction testing requirements to enter outdoor public venues such as parks or use public transportation.

And top officials and the state media have also softened their rhetoric about the virus.

Stocks rallied and the renminbi strengthened on Monday on signs of faster reopening.

“The timing of a major Covid-19 policy change may be a bit earlier than our baseline expectation of after March 2023,” UBS economists wrote in a note on Monday.

Of the 16 economists polled by Bloomberg, seven predict the reopening will happen in the second quarter of 2023, and four see it in the first quarter. The economists were not asked to define what a full reopening would entail.

The survey was conducted between last Wednesday and Friday, before the weekend’s moves in major cities like Shanghai and Hangzhou to ease restrictions.

Some of the economists warned the transition would be bumpy, likely involving trial and error by the authorities as they grapple with insufficient medical resources and low elderly vaccination rates.

“China’s reopening is on the way, but it will not be a plain-sailing journey, and the market should not expect a big bang removal of all epidemic prevention measures as in the West,” said Natixis senior economist Gary Ng.

That makes for an uncertain outlook for economic growth.

Five of the 16 economists said they will lower their growth forecasts for the fourth quarter and the full year of 2022. The median projection was lowered to 3.8 per cent and 3.2 per cent, respectively, from 3.9 per cent and 3.3 cent in the previous November survey.

“What matters more to the outlook are the practical realities on the ground that limit the ability of China to ease its Covid-19 restrictions and return economic life to normality,” said Moody’s Analytics economist Heron Lim.

The constraints include less effective vaccines in use and a reluctance to use foreign-made mRNA vaccines, vaccine hesitancy among the elderly and the limited capacity of the public healthcare system to deal with a surge in cases, he said. BLOOMBERG

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