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

Beijing’s business district is empty during rush hour on November 22, 2022, after local authorities asked people to work from home, amid many measures aimed at controlling the latest Covid outbreak.

Kevin Frayer | Getty Images News | Getty Images

BEIJING – Rising Covid infections in mainland China will make it harder for the government to achieve zero Covid without returning to a stricter lockdown, said Larry Hu, Macquarie’s chief China economist.

The number of daily cases has hovered around 28,000 or more over the past few days — close to the level seen during Shanghai’s strict lockdown in April, according to data from CNBC Wind Information. The figures showed mainland China last saw daily infections in June, after Shanghai eased restrictions.

The latest wave of Covid-19 has affected the southern city of Guangzhou, the capital Beijing and many parts of central China – forcing local officials to tighten restrictions on business and social activity this month.

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The road to reopening involves many back-and-forths.

Larry Hu

China Chief Economist, Macquarie

“China may have passed the point of no return, as it is unlikely to achieve zero Covid again without another strict Shanghai-style lockdown,” Hu said in a report on Tuesday. i.e. flatten the curve by tightening Covid controls now.”

Hu pointed to minor changes in government policy and propaganda this month as authorities prepare to reopen within the next six to nine months. But he noted that “the road to reopening will involve many back-and-forths.”

Markets have been speculating for weeks about the timing of China’s exit from its strict zero-covid policy. The controls have weighed on an economy that was barely growing at the time of Shanghai’s shutdown and posted just 3% growth in the first three quarters of the year.

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As of Monday, about 20% of China’s economy in terms of GDP was negatively affected by Covid controls, close to the 21.2% high recorded in mid-April during Shanghai’s lockdown, Nomura’s China chief economist Ting Lu said, citing the firm’s model.

“Beijing has recently shown early signs that it is ready to reopen, and it has taken some clarification measures, but reopening is likely to be an uncomfortably long process,” Lu said in a separate report this week.

He said Vietnam’s lifting of Covid restrictions since last autumn could shed light on China’s way forward. He noted that when the Southeast Asian country’s GDP rebounded, “infections did not immediately increase after the crash.”

Beijing tightens control over Covid

Local authorities in China face the difficult task of trying to target Covid measures while controlling infections.

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Some 412 million people were affected by the lockdown measures in mainland China as of Monday, according to Nomura’s estimate. That’s up from 340 million the previous week, the report said.

Nomura analysts noted that many locks or controls are implemented without public notice. “We believe [the southwestern municipality of] Based on our monitoring of multiple mobility indicators, Chongqing is currently experiencing the most severe local lockdown in China,” the statement said.

In Beijing alone, Covid surveillance has been tightened since Tuesday.

Authorities have announced more frequent virus testing requirements and ordered more restaurants to stop serving food in stores. More malls are closed, as are large parks. Various residential buildings were closed.

State media said on Tuesday that the city’s tech-focused Zhongguancun Forum, scheduled to start this week, will be postponed to next year. The conference was postponed until September.


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