China shows no signs of abandoning its zero-Covid strategy anytime soon, says Jefferies

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  • From the US to large parts of Europe and Asia, many countries are learning to live with the virus and have begun to lift most restrictions.
  • But China has not relaxed its ultra-strict zero-Covid strategy that includes a massive lockdown – even if just one or a handful of cases have been detected.
  • Jefferies highlighted three things that indicate China’s lack of immediate plans to move away from its zero-tolerance approach.

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According to US investment bank Jefferies, China is moving forward with its zero-Covid approach, and there are signs that it will not give up on that stance anytime soon.

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From the US to large parts of Europe and Asia, many countries are learning to live with the virus and have begun to lift most restrictions.

Countries initially took an aggressive approach through massive lockdowns and strict social restrictions, but they gradually abandoned that strategy as the highly contagious delta variant spread rapidly and lockdowns became less effective.

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But China has not relaxed its ultra-strict zero-Covid strategy that includes a massive lockdown – even if just one or a handful of cases have been detected. This includes widespread testing, highly controlled or closed borders, as well as robust contact tracing systems and quarantine mandates.

Recently, visitors to Shanghai Disneyland had to take a COVID test to exit. The need came after officials learned that close contacts of an infected person had visited the park a week earlier.

‘closed until further notice’

The Asian giant is now battling the spread of its biggest COVID outbreak due to the delta version, According to Reuters.

In a November 18 note, Jefferies analysts said, “It seems that China … has managed COVID very well, but the delta version presents new challenges. In addition to suppressing domestic affairs, ‘Preventing imported cases’ is an important part of the strategy.”

“The result appears to be a country that has no immediate plans to open up and live with the virus. News of snap lockdowns continue to pour in, and it looks like China is locked down until further notice.”

Jefferies highlighted three things that indicate China’s lack of immediate plans to move away from its zero-tolerance approach.

1. Passport Renewal

Jefferies said passport renewal data showed officials were not planning any outbound travel or tourism for some time. The bank said new issuances and renewals of Chinese passports decreased by more than 95% in the first half of this year compared to the same period in 2019.

“This may indicate that the central government is trying to restrict people’s ability to leave China,” Jefferies said.

The note also pointed to recent comments by China’s National Immigration Administration that said people who do not have an urgent need to travel internationally should postpone their plans. Officials reportedly said that the priority would be to issue or renew passports only to Chinese nationals who are studying or working abroad.

In comparison, passport issuance in the US was down 43% from 2019 to 2020, and increased by 32% in the first half of this year compared to the previous year.

2. Dedicated Quarantine Facilities

According to Jefferies, governments in Chinese cities are being asked to build 20 rooms for every 10,000 citizens—in dedicated or converted facilities—to cater to foreign arrivals.

Guangzhou is already moving away from using hotels, and a new facility is about to open with more than 5,000 rooms, while other provinces are “rapidly following,” according to Jefferies.

“Dedicated quarantine facilities are being built, which shows that inbound quarantines can last longer,” Jefferies said.

3. China’s Health Care System

According to Jefferies, the medical infrastructure in China may not be prepared for the high cases if borders are opened, or Covid is treated as endemic.

“China has significantly fewer hospital beds and doctors than many other countries. Its 3-tier healthcare system has barely survived the first wave of the COVID outbreak in early 2020,” analysts said.

According to Jefferies, its three-tier health care system includes city-level hospitals, district-level clinics, and rural health services provided by rural doctors. The number of hospital beds and doctors in rural areas is less than half that in urban areas on a per 1,000 people basis, the report said.

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“Poor medical infrastructure in rural areas makes it difficult to detect COVID cases at an early stage, and result in large-scale outbreaks back to the cities,” the bank said. “36 percent of China’s population lives in rural areas, so a closed border is the easiest way to prevent the health system from collapsing,” Jefferies said.

In addition, China’s spending on health care is “significantly” lower than in many other countries. “This could mean that Chinese officials are concerned that a major national outbreak could overwhelm their health system,” the bank concluded.

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