What to expect next as China eases covid controls

BEIJING — As mainland China loosens many of its strict COVID-19 controls, analysts point out that the country is far from a quick return to pre-pandemic status.

National authorities announced sweeping changes on Wednesday to make it easier to travel domestically, keep businesses operating and allow Covid patients to be quarantined at home.

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

“However, we also caution that the road to full reopening may still be gradual, painful and bumpy,” they said. The country does not appear to be well prepared for a massive wave of infections, and the infection rate of 0.13% leaves the country well short of what is needed for herd immunity, according to the report.

Daily Covid infections in mainland China, most of which are asymptomatic, jumped to a record high of over 40,000 in late November. Since then, the number has decreased as cities lowered virus testing requirements.

The path forward to reopening China could take a few months, with an increase in infections likely, according to a December 3 Goldman Sachs report. 4.

“With most of the population remaining uninfected before reopening, lower vaccination rates for the elderly than in many other economies, and cultural similarities, we believe the reopening of Hong Kong and Taiwan is most important in mainland China,” said China’s chief economist Hui Shan and his team.

“Their experiences indicate that cases are likely to rise exponentially upon reopening and persist for a period of time, a high vaccination rate for the elderly is key to a safe reopening, and mobility declines sharply as cases rise,” the Goldman report said.

In the past two months, Taiwan no longer requires international travelers to quarantine upon arrival, and has said people do not have to wear masks outdoors.

Last week, mainland Chinese authorities announced another campaign to vaccinate the country’s elderly.

In the near term, about 60% of people may be infected, no matter how the policy is adjusted, Feng Zijian, former deputy director of the Chinese Center for Disease Control and Prevention, said Tuesday during a talk at Tsinghua University. He said that figure could eventually rise to 80% or 90%.

The new measures issued by the Health Commission on Thursday focused on how to treat Covid patients at home, and included a list of medicines.

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

JD Health said online sales are up for cold medicine, fever-reducing medicine and related products. The company said its latest data showed that transaction volume for the week ending Monday rose 18 times compared to October.

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

He said that from Wednesday, negative virus tests are no longer required for travel within China, while large numbers of people usually travel for the upcoming Lunar New Year holiday. This means that there may be a rise in Covid cases, Pang said, and that China’s policy will never back down.

Chinese travel booking website Trip.com said that after a relaxation in domestic travel policies, searches for airline tickets for the Lunar New Year, which falls in late January 2023, have jumped to their highest levels in three years.

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

Locally, the city of Beijing said Wednesday night that people who want to dine at those restaurants will still need to show a negative virus test within the past two days.

Local media in Beijing reported on Wednesday, citing a worker of a virus testing company, that the processing of virus test results is taking longer due to the increase in positive cases. The report said that because virus tests are carried out in batches of 10, if one person tests positive, the device needs to process additional tests.

Goldman Sachs analysts expect China’s reopening — defined as a shift away from lockdowns — to come in the second quarter of 2023, according to a separate report on Wednesday.

“An earlier-than-expected reopening would add more downward pressure on growth in the near term, but moderate upside risk to our full-year 2023 GDP growth forecast,” the analysts said.

They predict that any initial reopening will create a burden on the economy “due to rising infections, temporary labor shortages and growing supply chain disruption.”

Goldman expects the Chinese economy to grow by 3% this year, and 4.5% in 2023.