China is easing corona restrictions – no reason to sound the all-clear

Berlin More and more cities in China are relaxing their corona restrictions. Since Monday, it is no longer mandatory in the economic metropolis of Shanghai to present a current negative Covid test when using public transport.

Beijing had already announced corresponding easing on Friday, followed by the tech metropolises of Shenzhen and several cities in the eastern Chinese province of Zhejiang. As the Reuters news agency reports, the government in Beijing is to announce new easing measures on Wednesday, following on from the 20 measures that were last announced in mid-November.

Some also saw the easing as a reaction to the nationwide protests of thousands of people at the end of November. By Chinese standards, they had reached an enormous size.

However, it is too early to sound the all-clear, health and economic experts warn. Especially since by no means all measures have been lifted and the lives of the residents of many cities continue to be extremely affected by the restrictions.

Although there is no longer an obligation to test when entering public transport, a 48-hour test is still mandatory in Beijing and other cities, for example, if you want to enter an office or supermarket. However, because many test centers had closed in the past few days, very long queues formed at the few remaining ones.

>> Read here: Protests in parts of China against corona policy – people call on Xi to resign

“The implementation of the requirements of the central government and the handling of the current outbreaks are handled very differently locally,” said Jens Hildebrandt, executive board member of the German Chamber of Commerce in China (AHK), the Handelsblatt. “While some cities are partially easing, the measures in other areas are even being tightened.”

The corona restrictions are still having a negative impact on local companies. Although there are hardly any restrictions on production, the supply chains are still disrupted, said Hildebrandt. Sales and service employees can still hardly travel to their customers.

The easing of the measures on Monday ensured a good mood on the Asian stock exchanges. The Shanghai Stock Exchange closed 1.8 percent up at 3212 points. The index of the most important companies in Shanghai and Shenzhen gained 2.0 percent and rose to 3,947 points. Hong Kong’s Hang Seng Index jumped 4.4 percent to 19,488 points, rebounding 35 percent from its Oct. 31 low.

German companies are preparing for difficulties

“The next few weeks will be crucial,” wrote Yanzhong Huang, senior fellow on global health at the US think tank Council on Foreign Relations, in an op-ed for the New York Times. “Local authorities on the front line are under increasing public and financial pressure to relax the measures,” Huang said. However, a lack of clear guidance from Beijing could result in a hasty and chaotic reopening and more infections.

“The way out of the Chinese zero-Covid policy will be bumpy,” agrees AHK representative Hildebrandt. “German companies are prepared for that.” Relapses into old patterns cannot be ruled out.

In fact, although the central government in Beijing sets out the rough lines for dealing with the pandemic, these are often contradictory, and the implementation of measures and the decision on this are up to the local authorities.

Often even the smallest units of the state organization, the so-called neighborhood committees, decide. In the past, these have decided, for example, whether and for how long a residential complex is sealed off and how long the residents are not allowed to leave their apartments.

The reasons for China’s zero-Covid strategy

One reason why China is still relying on the restrictions in the third year of the pandemic is the insufficient vaccination rate – especially among the elderly population. In addition, the Chinese hospitals are still poorly equipped with intensive care beds.

A nationwide outbreak would be very dangerous at this point, Huang analyses. If a quarter of China’s population were to become infected within the first six months of the easing, it could end up with an estimated 363 million infections, about 620,000 deaths and “a potential social and political crisis,” Huang writes. And this quota does not seem unrealistic. It corresponds to the course of the pandemic in the USA and Europe after the emergence of the highly contagious omicron variant.

In the first two years of the pandemic, China quickly got the spread of the virus under control through draconian measures. But with Omikron, the number of corona cases increased. The state leadership could not get the outbreaks under control and reacted with severe restrictions.

At the end of November, the President of the EU Chamber of Commerce in Beijing, Jörg Wuttke, spoke of a “catastrophic situation”. Even if the easing is now extended – the economy will not recover so quickly, at least in the short term.

>> Read here: New corona lockdowns are stalling the economy in China

Gradual easing in China possible

According to the China analysts at Deutsche Bank, a gradual opening in two phases is the most likely. In the first phase, the easing of restrictions will be gradual and cautious to avoid a rush on hospital resources, the analysts said.

Faster reopening is likely to begin once a steady decline in hospital admissions and deaths is seen. “Consistent with this reopening path, we believe China’s economic activity will remain subdued in the first half of 2023 before picking up rapidly in the second half,” a recent report said. Under these conditions, the analysts expect growth of 4.5 percent in 2023.

More problems for China’s economy

In fact, it is not only the corona restrictions that are burdening the Chinese economy, emphasizes the economist Alicia Garcia Herrero from the French investment bank Natixis. The factors behind the structural slowdown in China’s economic development remain intact, she told the Financial Times, including the real estate crisis, the aging population and falling productivity. All of this will continue to weigh on the country’s economic prospects, even if the restrictions are lifted.

Consumption in China has remained at a low level for months, mainly due to restrictions, the ongoing real estate crisis and high unemployment, especially among the younger population.

China’s industry falls to seven-month low

Most recently, the official Purchasing Managers’ Indices (PMI) for November were even worse than expected, with both the manufacturing and services PMIs falling below the 50 level, indicating a slowdown.

In October, exports also fell by 0.3 percent compared to the same month last year – so far an important pillar of the Chinese economy. The Chinese customs authority will present the latest foreign trade figures for November on Wednesday. On average, analysts expect a minus of 3.5 percent and thus an even sharper decline in exports.

More: Total Surveillance and Repression – China’s Dangerous Transformation

source site-17