China’s exit from the COVID-19 pandemic could run through the end of next year, with reopening only starting sometime from April and a slow return to normality likely weighing on investors’ hopes for a quick economic recovery, according to a survey of economists.
Almost half of the 23 economists surveyed by Bloomberg News said they think reopening from “zero COVID” could begin in the second quarter of next year, after a parliamentary meeting that usually happens in early March.
Another seven said it would start in the July-September period, while two do not expect change until sometime in 2024, which would be at least four years after the virus was first reported in Wuhan.
Photo: Reuters
The Bloomberg survey asked respondents to choose a time period in which they expect a reopening to start, but did not ask them to define what the initial steps might be.
The Chinese government has given little public indication that it is considering or planning an exit from the current policy, which combines mass testing with movement controls and lockdowns to stop infections.
However, maintaining “zero COVID” is becoming more disruptive and expensive, fueling expectations that Beijing must eventually shift and start reopening, domestically and internationally.
The timing of when the government starts to reduce restrictions that are weighing on consumption and investment is the key question for economists as they assess next year’s outlook.
Any recovery in China hinges on how quickly people start spending money again after COVID-19 curbs are eased, according to UBS Group AG, given that its economy cannot rely as much on help from exports and infrastructure investment.
“When the pivot to living with the virus does begin, it will unleash significant demand,” Bloomberg Economics chief Asia economist Shu Chang (舒暢) said.
“It will boost GDP growth in the year that follows by as much as 1.6 percentage points,” with sectors such as transport, hospitality and retail to see the biggest uplift, she said.
Even with a relaxation in COVID-19 rules, Shu said the economy “will still face strong headwinds from the downturn in property and weakening external demand.”
Assuming China’s COVID-19 restrictions are lifted in the second half of the year, growth should pick up to 5.7 percent next year from 3.5 percent this year, she wrote.
It might also take much longer than some market analysts are expecting for domestic travel, private consumption and business activity to return to normal.
That is because China would face a large wave of infections and deaths once it loosens restrictions, using the experiences of other Asia Pacific nations where similar policies were implemented as a guide.
Taiwan, Australia and New Zealand all experienced a swift rise in cases and deaths for a time after they loosened their restrictions, even with high levels of vaccination and prior outbreaks.
The situation in China could be even worse, as the country faces an “immunity gap,” as it has successfully protected the vast majority of its 1.4 billion people from exposure to the virus.
A May study by researchers at Shanghai’s Fudan University provided a forecast of what could happen if the government were to allow the Omicron variant of SARS-CoV-2 to spread unchecked — a “tsunami” of infections resulting in 1.6 million deaths, it said.
Even if China reopens much more slowly and cautiously, it would continue to face problems. If deaths rose to the level of Australia after that nation eliminated strict controls, more than 800,000 Chinese would die.
Whatever the magnitude, mass death in a short period of time would likely shock a population that so far has only seen around 5,000 confirmed deaths from the virus in the past two-and-a-half years.
Even if that does not prompt local governments around the country to temporarily pull back on reopening measures, it would likely mean many people would stay home instead of going out to spend and work, either out of caution or to care for a family member who is sick.
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