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

Beijing’s business district was almost empty during rush hour on November 22, 2022, after authorities asked people to work from home, amid several measures aimed at controlling the latest Covid outbreak.

Kevin Frayer | Getty Images News | Getty Images

BEIJING – The spread of Covid infections across China makes it difficult for the government to reach zero-Covid without returning to a strict lockdown, said Larry Hu, Chief Economist at Macquarie.

In the past few days, the daily case count has risen to 28,000 or more — close to levels seen in April during Shanghai’s strict lockdown, according to CNBC’s air data count. The figures show 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 city of Beijing and many parts of central China – prompting local officials to tighten business and social restrictions this month.

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The road to reopening is set to involve some back-and-forth.

Larry Hu

Chinese economist, Macquarie

“China may have passed the point of no return, as it is unlikely to achieve zero Covid without another strict Shanghai lockdown,” Hu said in a statement on Tuesday. “What they can do now is to reduce the spread of the virus, that is, soften the curve, by strengthening the control of Covid for now.”

Hu announced minor changes this month in government policy and propaganda as authorities prepare to reopen in the next six to nine months. But he noted that “the reopening process is set to involve back-and-forth.”

Markets have speculated for weeks about the timing of China’s move to a strict zero-Covid policy. The regime has weighed on the economy, which has caused slow growth while Shanghai has been under lockdown and posted growth of just 3% in the first three quarters of the year.

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In terms of GDP, nearly 20% of China’s economy was negatively affected by the Covid regime as of Monday, close to the 21.2% recorded in mid-April during the Shanghai lockdown, China’s Chief Economist Ting Lu he said, citing the firm’s model.

“Beijing has recently shown initial signs of willingness to reopen, and has issued corrective measures, but reopening may be a long and uncomfortable process,” Lu said in a separate statement this week.

He said Vietnam’s lifting of its Covid restrictions since autumn last year could light the way for China. He noted how the East Asian nation has seen “no immediate recovery from the post-pivot pandemic,” while its GDP continues to grow.

Covid control is tightening in Beijing

Local authorities in China have faced the difficult task of trying to make Covid measures more targeted, while controlling the infection.

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As of Monday, about 412 million people have been affected by China’s lockdown measures, according to Nomura’s estimate. That’s up from 340 million last week, the report said.

Nomura analysts noted that many of the locks or controls are done without public disclosure. “We believe [the southwestern municipality of] Chongqing is currently the most closed city in China, based on our analysis of several travel metrics, the report said.

Covid control in Beijing has only been tightened since Tuesday.

Authorities have announced regular virus testing requirements, and ordered restaurants to freeze food on the counter. Many shopping centers are closed, as are major parks. Various residential compounds are closed.

State media said on Tuesday that the city’s technology-focused Zhongguancun Forum, which had been scheduled to start this week, would be set for next year. The conference had been delayed from September.

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