China’s Covid Policy Is Still Confusing. Stocks Are Rallying Anyway.

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China’s zero-covid policy has helped crush the country’s economy. Here: Soldiers and paramilitary policemen wearing face masks in Beijing.

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Andy Wong / AP / shutterstock

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China’s long-standing draconian COVID-containment policies are rapidly turning into a chaotic mix of easing and tightening, confusing residents, policy experts and markets.

At the Communist Party’s annual gathering last month, leader Xi Jinping reiterated a firm commitment to the country’s nearly three-year-long zero-Covid policy, which often implements citywide lockdowns, centralized quarantines and mass testing. The policy, along with a weak property market that is only getting worse, has crushed China’s economy this year.

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“The [property] The slowdown has been further exacerbated by the Covid lockdown and the expectation of further increases. “Those shocks are reflected in declining household employment and income expectations, prompting many to increase savings and buy homes,” Gavkel Dragonomics wrote in a recent note.

Xi’s October speech sent the mainland and Hong Kong stock markets, which had fallen more than 20% over the past year, to even lower levels.

Yet days later, evidence-free rumors spread widely on social media that, despite Xi’s policy confirmation, top officials were in fact in the planning stages of opening up – by loosening domestic controls and inbound flight restrictions. Although several officials denied speculation, the market quickly reversed course.

Those volatile times now seem calmer than the current confusion over Covid policies.

The city of Guangzhou is currently facing the worst outbreak of any region in China, and three weeks of lockdown and food shortages sparked a rare mass street protest on Monday. On Thursday, three days after the protests, city officials said they were now building temporary quarantine facilities with a capacity of 250,000 beds.

The Guangzhou unrest follows smaller protests in Beijing, the national capital of Lhasa and Zhengzhou, the capital of Tibet, where workers fled a factory that assembles most Apple (AAPL) iPhones after a handful of suspected cases were released from quarantine. Plant to avoid.

Northwest Xinjiang region – infamous for Forcing at least one lakh Uyghur Muslims into internment camps In recent years—recently exceeded 100 days of quarantine, becoming the longest locked-down area in China during the entire pandemic. Cases continued to rise on Friday.

A trifecta of elements puts China at unique risk for an explosive outbreak: the country’s domestic vaccines are less effective than those in the West, few prior infections in the closed society mean nearly 99% of the population have no natural immunity, And China’s vulnerable elderly cohort currently has a low vaccination rate.

“The government is considering the safety, effectiveness, accessibility and affordability of vaccines before selecting them,” Shen Hongbing, deputy director of China’s CDC, said on Thursday, referring to the possible introduction of the BioNTech vaccine. Non-domestic shots available in the country.

Major The most shocking aspect of the current outbreak is that the government has taken several measures at once to relax its zero-covid policy. On 11 November, health officials announced an easing of 20 measures in restrictions, including reducing quarantines for incoming travelers, eliminating penalties for airlines flying infected passengers, and rolling back several domestic flights.

“More international routes will open their services later in winter and next spring,” Qi Yaoming, deputy general manager of Guangzhou’s World Manufacturing Center, told a press conference on Wednesday.

“Anxiety, confusion and chaos seen in many Chinese cities following last week’s policy easing highlight not only a preference gap between state and society on the zero-Covid future, but also a growing capacity gap to meet local governments are facing. ambitious goals for the policy,” explained Yanzhong Huang, director of the Center for Global Health Studies at Seton Hall University and a senior fellow for global health at the Council on Foreign Relations Baron’s,

Meanwhile, mainland and Hong Kong markets have remained bullish this month – after one of their worst years ever – as rumors and then formal policy emerged. Hong Kong’s Hang Seng index, in particular, has jumped more than 25% in November, the worst-performing major stock gauge.

While there is no clear consensus among analysts on how this will work, many believe the relaxations will continue gradually, with bumps along the way.

“Short of a public health disaster, it is hard to imagine that the party will revert to its zero-tolerance approach,” Andy Rothman, investment strategist at Matthews Asia, wrote this week.

Seton Hall’s Huang said: “It is interesting that both supporters and opponents of zero-covid appear to share expectations on the impending policy change. This expectation is likely to be self-fulfilling in the coming weeks.

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