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China passes from Covid-zero but it will not be the way forward

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Passengers wait to board a train at Hongqiao station in Shanghai on December 6, 2022.

Hector Retamal | AFP | Getty Images

BEIJING — As mainland China eases many of its strict Covid controls, analysts point out the country is far from a quick return to a pre-pandemic situation.

National authorities announced sweeping changes on Wednesday to make it easier to travel within the country, keep businesses operating and allow Covid patients to self-quarantine at home.

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

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

Daily Covid infections in mainland China, mostly asymptomatic, hit a record high above 40,000 in late November. The number has since declined as cities reduced virus testing requirements.

The road ahead for China’s reopening could take a few months, with infections likely to rise, according to a Dec. 4 Goldman Sachs report.

China moves towards cautious reopening

“With most of the population uninfected prior to reopening, lower vaccination rates among the elderly than many other economies, and cultural similarities, we believe the reopenings of Hong Kong and Taiwan are most relevant for China. mainland,” said China’s chief economist Hui Shan and a team.

“Their experiences suggest that cases are likely to skyrocket upon reopening and persist for some time, high vaccination rates among older adults are key to a safe reopening, and mobility declines sharply as as cases increase,” the Goldman report said.

In the past two months, Taiwan no longer required international travelers to quarantine upon arrival and said people did not have to wear masks outside.

60% of people can catch Covid

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

In the short term, around 60% of people could be infected regardless of how the policy is adjusted, Feng Zijian, former deputy director of the Chinese Center for Disease Control and Prevention, said Tuesday at a conference in Tsinghua University. He said that figure could eventually climb to 80% or 90%.

New measures published 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 local demand for associated drugs was already on the rise.

JD Health said online sales increased for cold medicines, fever medicines and related products. The company said its latest data showed trading volume for the week ended Monday was up 18x from October.

Looking ahead, it’s pretty clear China’s Covid policy is about to turn a corner, said Bruce Pang, chief economist and head of research for Greater China at JLL.

As of Wednesday, negative virus tests are no longer required to travel to China, while large numbers of people typically travel around the upcoming Lunar New Year holiday, he said. That means there could be an increase in Covid infections and China’s policy will never go back, Pang said.

Chinese travel booking site Trip.com said that after domestic travel policies were relaxed, searches for plane tickets for the Lunar New Year, which falls at the end of January 2023, have reached their highest level ever. three years.

No full reopening yet

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

At the local level, the city of Beijing said late Wednesday that people wishing to dine in restaurants should still present a negative virus test within the past two days.

But processing virus test results is taking longer due to an increase in positive cases, Beijing local media reported on Wednesday, citing an employee of a virus testing company. Since virus tests are done in batches of 10, if a person’s result comes back positive, the machine must process additional tests, according to the report.

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Goldman Sachs analysts expect China’s reopening – defined as a release from lockdowns – to occur in the second quarter of 2023, according to a separate report on Wednesday.

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

They expect any initial reopening to dampen the economy “due to a surge in infections, a temporary labor shortage and increased supply chain disruptions”.

Goldman predicts 3% growth for the Chinese economy this year and 4.5% in 2023.

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