China may have ‘passed the point of no return’ as Covid infections soar

BEIJING – The Covid-19 pandemic across mainland China is making it difficult for the government to achieve zero-Covid without returning to strict lockdowns, Macquarie’s China chief economist Larry Hu said.

In the past few days, the number of daily cases has climbed to around or above 28,000 – close to the level seen in April during a strict lockdown in Shanghai, according to a CNBC compilation of Wind Information data. The figures show the last time China saw only a small number of daily infections was in June, shortly after Shanghai eased its restrictions.

The latest wave of Covid-19 has hit the southern city of Guangzhou, the capital Beijing and many parts of central China – prompting local authorities to ease restrictions on business and social interaction this month.

The road to recovery will involve a lot of back and forth.

Larry Hu

China’s leading economist, Macquarie

“China would have passed the point of no return, because it is unlikely to achieve zero Covid again without the strict lockdown of Shanghai again,” Hu said in a report on Tuesday. “What the policymakers can do now is to reduce the spread of the virus. That is to destroy the body, by closing the control of Covid for the time being.”

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Hu pointed to minor changes this month in government policy and the media as authorities prepare to reopen in the next six to nine months. But he said “the road to development has involved a lot of back and forth.”

The market has been vocal for a few weeks about the timing of China’s exit and its strong zero-Covid policy. The management reviewed the economy, which experienced little growth during the Shanghai lockdown and posted growth of just 3% in the first three quarters of the year.

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We think China will fully open from the third quarter of 2023, UBS said

In terms of GDP, nearly 20% of China’s economy was affected by the poor handling of Covid as of Monday, close to the 21.2% peak recorded in mid-April during the Shanghai lockdown, the main economy China by Nomura Ting Lu said, citing the company’s policy.

Lu said in a separate report this week, “Beijing has shown early signs of being ready to reopen, and has put forward a positive recovery plan, but the reopening may be a long and uneasy process.”

He said Vietnam’s easing of its Covid restrictions since the fall of last year could pave the way for China to move forward. He noted how the Southeast Asian country saw “no epidemic immediately after,” as its GDP rebounded.

Control of Covid is tight in Beijing

Local authorities in China have faced the difficult task of trying to make the Covid system more targeted, while controlling the disease.

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As of Monday, about 412 million people were affected by the anti-lockdown measures in China, according to Nomura estimates. That’s up from 340 million the previous week, the report said.

Why China has not shown any sign of backing down on its 'zero-Covid' plan

Nomura analysts said many lockdowns or controls are implemented without public notice. “We believe [the southwestern municipality of] Chongqing currently has the worst regional congestion in China, based on our analysis of several traffic metrics,” the report said.

Covid control in Beijing alone has been closed since Tuesday.

Authorities announced more frequent virus testing requirements, and ordered many restaurants to suspend takeout. Many supermarkets are closed, while there is a large park. The compound has been cordoned off.

State media said on Tuesday that the Zhongguancun conference focused on the city’s technology that was scheduled to start this week will be postponed until next year. The conference has already been delayed from September.

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