China is moving away from Covid-zero, but it won’t be a straight road ahead

Passengers wait to board a train at the Hongqiao railway station in Shanghai, December 6, 2022.

Hector Retamal Afp | Getty Images

BEIJING — As mainland China relaxes many of its stringent Covid controls, analysts say the country is far from quickly returning to a pre-pandemic situation.

The national authorities announced sweeping changes on Wednesday to make it easier to travel within the country, keep businesses open and allow Covid patients to self-quarantine at home.

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“These measures are very welcome for an economy that has been hit hard this year,” Ting Lu and his team, Nomura’s chief China economist, said in a report.

“However, we would also like to warn that the path to full reopening can be gradual, painful and bumpy,” they said. The country does not look well prepared for a massive wave of infections, according to the report, with an infection rate of 0.13% leaving the country far below the level needed for herd immunity.

Daily cases of Covid infection in mainland China, mostly asymptomatic, hit a record high in late November, surpassing 40,000. That number has since dropped as cities have lowered virus testing requirements.

According to a December 1 report by Goldman Sachs, China could take several months to reopen, with a spike in infections likely. four.

China takes steps towards cautious reopening

“Given that most of the population was not infected prior to the discovery, lower vaccination rates for the elderly than in many other countries, and cultural similarities, we believe the reopening of Hong Kong and Taiwan is most relevant to mainland China,” said China’s chief economist. Hui Shan and his team.

“Their experience is that cases are likely to rise sharply after reopening and linger for a while, high vaccination rates for older people are key to a safe reopening, and mobility declines sharply as cases rise,” Goldman said in the report.

Over the past two months, Taiwan is no longer requiring international travelers to be quarantined upon arrival and has said people do not need to wear masks outdoors.

60% of people can get Covid

Last week, authorities in mainland China announced another attempt to vaccinate the country’s elderly.

In the near future, about 60% of people could become infected, regardless of how policies are adjusted, Feng Zijian, former deputy director of the Chinese Center for Disease Control and Prevention, said Tuesday during a speech at Tsinghua University. He said that eventually this figure could rise to 80% or 90%.

The new measures, published by the health commission on Thursday, focused on how to treat Covid patients at home and included a list of medications.

Whether out of necessity or precaution, local demand for the appropriate drugs was already on the rise.

JD Health said online sales of cold medicines, fever reducers and related products have surged. The company said its latest data showed transaction volume for the week ending Monday was up 18 times from October.

Looking ahead, it’s clear China’s Covid policy is about to hit a turning point, said Bruce Pang, chief economist and head of Greater China research at JLL.

As of Wednesday, negative tests for the virus are no longer needed to travel in China, he said, while a large number of people usually travel due to the upcoming Lunar New Year holidays. This means there could be a spike in Covid infections and China’s policy will never go back, Ban said.

Chinese travel booking site said that after easing domestic travel policies, flight searches for the Lunar New Year, which falls at the end of January 2023, rose to the highest level in three years.

Not fully open yet

On Wednesday, health authorities stressed that the latest changes do not involve a full reopening. There has been no reduction in quarantine time for international travelers, and the measures include cases where a negative test for the virus is still required.

Locally, the city of Beijing said on Wednesday evening that people wishing to dine in restaurants would still need to test negative for the virus within the past two days.

But virus test results are taking longer to process due to an increase in the number of positive cases, local Beijing media reported on Wednesday, citing an employee at the virus testing firm. The report says that because virus tests are being done in batches of 10 people, if one person tests positive, the machine needs to process additional tests.

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According to a separate report released on Wednesday, analysts at Goldman Sachs expect the opening of China, defined as a lockdown release, to occur in the second quarter of 2023.

“Earlier than expected, the reopening will increase downward pressure on short-term growth, but mitigate the risk of upping our 2023 GDP growth forecast,” analysts said.

They expect any initial reopening to create a brake on the economy “due to a surge in infections, temporary labor shortages and increased supply chain disruptions.”

Goldman predicts China’s economy will grow 3% this year and 4.5% in 2023.

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