China’s sudden ‘reopening’ reveals new economic challenges

People line up outside a flu clinic in Beijing on December 14, 2022, just days after the country tightened its Covid controls amid freezing weather in the capital city.

Yuxuan Zhang | Afp | Getty Images

BEIJING – Mainland China’s rapid rollback of many Covid-related restrictions has come as a surprise, revealing a new set of economic challenges.

In the last two weeks, local and central government authorities have renewed several measures that have forced many people to stay at home and businesses to operate remotely. Notably, the central government said last week that incoming virus tests and health code inspections are no longer required to leave home.

At this time, reports of people here are sick. The city of Beijing said on Sunday its flu clinics saw 22,000 visits – up 16 from last week.

“This reopening came suddenly, and with determination. It exceeded our expectations,” said Gang Yu, founder and executive chairman. 111, an online retailer of pharmaceuticals and medical services. That’s according to CNBC’s translation of his remarks in Mandarin.

Lack of staff and medicines

Since late November, orders for anti-influenza products and related medicines have increased tenfold, Yu said in a telephone interview on Thursday. He said there was an “extraordinary shortage” of drugs that factories could not keep up with, a situation he expected to last for another three or four weeks.

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On top of the high demand, tens of workers at 111 warehouses or offices in different parts of China have tested positive for Covid, creating an “unusual shortage” of workers, Yu said.

It’s a different challenge than earlier this year, when widespread Covid-19 shutdowns meant thousands of new orders were stuck at various distribution points each day, Yu said.

China will come through the Covid reopening, but it will be a difficult journey

Delivery is slower than usual in some parts of the country.

As of Sunday, China’s postal agency said more than 400 delivery points in Beijing and other parts of the country remain closed for reasons related to Covid.

For perspective, the postal service said Tuesday it collects more than 360 million packages a day — more than one package for every person in the US.

We think that the upcoming migration around the Chinese New Year holiday in late January could bring an unprecedented spread of Covid and great disruption to the economy. announced on Wednesday that more than 1,000 couriers from other parts of the country have arrived in the capital of Beijing. Anecdotally, over the past few days in Beijing, app-based food and hourly delivery grocery services have been doing so for much longer periods, or the next day.

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Additional infections can end the stretch

“In the past two weeks, the Chinese government has made a sudden 180-degree change in the elimination of zero-covid policies, most of the domestic prevention measures have been completely stopped,” said Nomura China Chief Economist Ting Lu and and the team in a statement on Thursday.

“Covid infection may end the positive impact of the reduction soon.”

“The rapid increase in infections in major cities may be just the beginning of a major Covid-19 pandemic,” say analysts.

“We expect the main job indicators to remain weak or to decline further in December. We think that the coming migration around the Chinese New Year holiday in late January could bring an unprecedented spread of Covid and major disruptions to the economy.”

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China reported Thursday a worse-than-expected decline in retail sales in November, along with slower growth in industrial production and fixed investment.

Drive the winter first

Social work is often curtailed amid infections and freezing weather in northern cities. Traffic data from Baidu shows that most people in major cities such as Beijing and Guangzhou have not evacuated, and congestion levels are still very low as of Thursday.

Control over Chinese travel booking site has also been reserved for what domestic travel will look like again.

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“We’ve actually seen a sharp increase in domestic flight bookings and hotel bookings over the past two weeks,” they said Thursday, according to FactSet’s earnings report.

“But in the near term, we remain cautious as winter is typically a flat season for business and leisure travel,” they said.

“And it may take some time for people to get over the first wave of the infection before travel demand is fully released and rebounds. But we expect to see good recovery and growth in the domestic travel sector next year.”

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