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

BEIJING – The surge in Covid infections across China will make it harder for the government to achieve zero Covid without returning to strict lockdowns, China’s chief economist Larry Hu said.

In the past few days, the daily number of cases has reached about 28,000 or more — close to the levels seen in April during the severe lockdown in Shanghai, according to CNBC’s tally of wind data. The figures showed that the last time China saw just a few 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 tighten restrictions on business and social activities this month.

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

Larry Hu

Chief Economist of China, Macquarie

“China has already passed the point of no return as it is unlikely to achieve zero Covid again without another strict lockdown of Shanghai,” Hu said in a report on Tuesday. “What policymakers can do now is to slow the spread of the virus. That is, flatten the curve by tightening Covid controls now.”

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Hu pointed to little change this month in government policy and propaganda as there are signs authorities are preparing to reopen in the next six to nine months. But he noted that “the road to recovery will have to involve a lot of back and forth.”

Markets have been speculating for weeks about when China will withdraw from its strict zero-Covid policy. The controls have had an impact on the economy, with Shanghai clearly not picking up growth, posting just 3% growth in the first three quarters of the year.

We think China will fully reopen by the third quarter of 2023, says UBS
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Citing Nomura’s model, China’s chief economist Ting Lu said that in terms of GDP, about 20% of China’s economy had been adversely affected by the Covid-19 outbreak as of Monday, up from 21.2% in mid-April when Shanghai was locked down. has been

“Beijing has recently shown early signs of readiness to reopen, and it has taken a number of concrete measures, but reopening may be a long and uncomfortable process,” Lu said in a separate report this week.

He said Vietnam’s lifting of its Covid-19 restrictions last fall could shed light on China’s path forward. He noted how the Southeast Asian country did not see an “immediate increase in infections after the turnaround” while its GDP rebounded.

In Beijing, the control of Covid is tightened

Local authorities in China have faced a difficult task in 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. That’s up from 340 million the previous week, the report said.

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Nomura analysts noted that many of the restrictions or controls are implemented without public announcement. “We believe [the southwestern municipality of] “Chongqing is currently experiencing the heaviest local blockade in China based on our observation of multiple traffic metrics,” the report said.

Covid control has only been tightened in Beijing since Tuesday.

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

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

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