Chinese Hunker Down Despite Zero-Covid Policy Ending Amid Virus Wave

Tyler Durden's Photo
by Tyler Durden
Thursday, Dec 15, 2022 - 12:20 AM

China faces a surge in Covid-19 infections as Beijing dismantles strict pandemic controls and embraces a faster reopening of the economy. The abrupt shift in policy is very problematic because not everyone is celebrating the easing of zero Covid rules, as many are hunkering down amid the winter Covid wave. 

The sudden move away from zero Covid rules after nearly three years of Beijing following a stringent playbook used to eliminate the virus has yet to translate into economic success. People are staying home, avoiding stores and restaurants, and other public areas as they panic hoard staple items to survive the Covid wave, which could impact an estimated 80 to 90% of the Chinese population, according to a new projection by Feng Zijian, a former deputy chief at China's Centers for Disease Control and Prevention. 

WSJ explained that people in large cities such as Shanghai and Guangzhou stay home despite the shift in government policy. They spoke with one Beijing resident, Qian Yingqin, who said her family hadn't left their home since Sunday. 

"I've never seen fewer people on the streets and more people wearing masks outside in the past three years," Yingqin said, who recently postponed a trip to Dali, a tourism hot spot in southwestern China. She warned: "It's simply impossible to fend off the virus anymore."

Bloomberg Intelligence's chief pharmaceutical analyst Sam Fazeli said in a television interview on Tuesday that Beijing's mindset since pivoting away from the zero-tolerance policy is "there's not so much we can do, we've done the best we can. We've got the blueprint for what the West did and what happened, so let's just let it rip - which is what I think is going on." 

"As China enters its first winter with Omicron, things could get worse before getting better," Citigroup analysts told clients last month. 

Bloomberg's Fazeli said the reopening could result in some 5 million people hospitalized and up to 700,000 deaths. 

Economists and analysts have been widely optimistic about the current path of reopening, but others warn it's going to be a bumpy ride:

"There is a problem with people thinking the pullback of Covid-zero measures is equivalent to the economy reopening, which it is not," said Leland Miller, chief executive officer of China Beige Book, a research firm that conducts surveys.

Even though Morgan Stanley economists upgraded China's 2023 GDP growth target due to reopening, they admitted economic growth would suffer some near-term pain due to the Covid infection wave that might disrupt production and consumption. 

WSJ pointed out high-frequency data, such as mobility and internet search trends, that don't signal an imminent rebound in economic growth but rather one that will be muted, at least for the winter season, until infections wane.

Some recent data on mobility patterns show increases in traffic and subway usage in some cities, though the numbers remain depressed compared with 2021, when China was largely free of Covid cases. Sales of cars and properties also fared better last week than the previous week, giving a glimpse of what China's economy could look like more broadly as it works through its Covid cases.

But behavior in places where Covid is becoming most prevalent—especially Beijing—suggest a rocky stretch in the near term. Searches for the words "fever" and "rapid antigen test" on Baidu, China's dominant search engine, saw the highest surges over the past week in Beijing, according to economists from Nomura.

Li Jianxing, the co-founder of InstaShake, a milkshake chain in Shanghai, warned:

"There's no sign of a strong recovery just yet, because people are still afraid of getting the virus." 

Logic doesn't seem to apply to Beijing's grand reopening of its economy during winter when spring would've been a much better time. Or perhaps the government wants to infect as many people as possible to get the Covid wave over with?