Macquarie’s chief China economist, Larry Hu, said surging Covid infections across mainland China was making it difficult for the government to achieve zero Covid without returning to a harsh lockdown.
In the past few days, the number of daily cases has risen to around 28,000 or more — close to levels seen in April during a strict lockdown in Shanghai, according to CNBC’s calculations of wind information data. The figures showed that the last time mainland China saw a handful of daily infections was in June, shortly after Shanghai eased its restrictions.
The latest Covid wave has hit the southern city of Guangzhou, the capital Beijing and many central parts of China – prompting local officials to tighten restrictions on business and social activities this month.
“China may have already passed the point of no return, because it is unlikely to achieve zero Covid again without another strict Shanghai-style lockdown,” Hu said in a report on Tuesday. “What policymakers can do now is slow the spread of the virus, for example.” Flattening the curve, by tightening Covid controls right now.”
He pointed out slight changes this month in government policy and propaganda as signs authorities are preparing to reopen in the next six to nine months. But he noted that “the road to reopening will involve a lot of back and forth.”
Markets have speculated for weeks about the timing of China’s exit from its strict “zero Covid” policy. The controls affected the economy, which barely boosted growth while Shanghai was in lockdown and posted growth of just 3% over the first three quarters of the year.
In terms of gross domestic product, nearly 20% of China’s economy was negatively affected by Covid controls as of Monday, close to the 21.2% high recorded in mid-April during Shanghai’s lockdown, said Nomura’s chief China economist, Ting Lu, citing a report. Company model.
“Beijing has recently shown early signs that it is ready to reopen, and has implemented some fine-tuning measures, but reopening may be a drawn-out process with unease,” Lu said in a separate report this week.
He said Vietnam’s lifting of COVID-19 restrictions since last fall may shed light on the way forward for China. He noted that the Southeast Asian country did not see “any immediate increase in the number of infections after the pivot” while its GDP rebounded.
Local authorities in China faced the difficult task of trying to make Covid measures more targeted, while controlling infections.
As of Monday, some 412 million people have been affected by the lockdown measures in mainland China, according to Nomura’s estimates. This is higher than the 340 million in the previous week, the report said.
Nomura analysts noted that many shutdowns or controls are implemented without public announcement. “we believe [the southwestern municipality of] Chongqing is currently experiencing the most severe localized lockdown in China, based on our observation of several measures of mobility,” the report said.
Controls over Covid have been tightened in Beijing alone since Tuesday.
Authorities announced requirements for more frequent virus testing, and ordered more restaurants to suspend in-store dining. More malls are closed, as are large parks. Many apartment complexes have closed.
State media reported on Tuesday that the city’s technology-focused Cheungwankun Forum which was due to kick off this week will be pushed back to next year. The conference had already been postponed from September.
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