Bowing to pressure to save growth in the world’s second-largest economy

The relief comes sooner than expected and two weeks after multiple protests in several major cities. The demonstrators, mostly young protesters, were protesting the zero-infection measures maintained by China as the rest of the world reopens after the pandemic.

President Xi Jinping said at a meeting with European Union officials last week that students were largely behind it, admitting it was the result of frustration from nearly three years of corona restrictions. Extensive relief is now being approved.

– Not very optimistic

According to the Chinese government (State Council), for the first time some infected people will be able to complete the quarantine at home. People also do not need to show a negative corona test before taking public transport or going to a shopping mall.

Morning reports from Asian financial institutions on Thursday were dominated by calm in China.

“We are not very optimistic that any of these measures will lead to a significant increase in economic growth. Despite the easing of movement restrictions ahead of Chinese New Year, many may choose to avoid crowded areas. Therefore, we do not expect a significant jump in private consumption in the first quarter of 2021,” writes ING from Singapore.

There is great skepticism about official promises of aid.

– Hang Seng Bank macro-economist Dan Wang tells CNBC that we don’t know if there will be a “return to normalcy” in the next six months.

Hong Kong’s main stock market index fell 3.2% on Wednesday after the reliefs were approved. The Hang Seng index has risen sharply since November 1 – just in time for a softening in China.

Devil’s Virus

The very strict restrictions imposed by China mean that a very small proportion of the population is infected. This is likely to change soon. The number of confirmed infected people is around 20,000 every day.

– 80-90% of the population will be infected. According to Bloomberg, Feng Zijia, deputy director of the Chinese Institute of Public Health, told a meeting at Tsinghua University that no matter how infection control measures are adjusted, it will be inevitable for most people.

China’s communist leadership has defended its zero-infection strategy, saying it has saved more than a million lives. President Xi has called the coronavirus “the devil’s virus” and that only a “people’s war” can defeat it.

– There will be major outbreaks of infection in China in the next two months, but it is difficult to predict when the peak will be reached or how people will adapt. We want to hear about hospitals that cannot accept patients. Ben Cowling, an epidemiologist at the University of Hong Kong, told The Wall Street Journal that it won’t be long before we hear about outbreaks in nursing homes or institutions.

Almost everyone is infected

China posted dismal trade statistics in November, the biggest drop since the pandemic began in spring 2020. Exports decreased by 8.7% and imports by 10.6% compared to the same month last year.

– We expect exports to decrease further in the next quarters due to the weakening of international demand. Abandoning China’s zero-contagion strategy and increasing support for the real estate sector will ultimately lead to improved domestic demand. That probably won’t happen until the second half of next year, Julian Evans-Pritchard, chief China economist at Capital Economics, said in a report.

In recent weeks, international financial institutions have lowered their growth forecasts for China for 2022 and the first quarters of 2023. This is because there is a lot of uncertainty about the coronary restrictions and what will happen when these are relaxed and possibly removed.

Goldman Sachs writes in a new report that people in China are avoiding going out to reduce the risk of infection.

“Instructions and mobility could diverge after reopening, hurting economic growth,” the investment bank wrote.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would love for you to share our work using links that lead directly to our pages. Copying or other forms of use of all or part of the content is permitted only with written permission or as permitted by law. See here for more terms.