Taking a hit: A pedestrian passes a sign showing the numbers for the Hang Seng Index in Hong Kong. Hong Kong and Chinese shares are enduring steep losses after the mainland was rocked by protests against the strict zero-Covid policies and calling for more political freedoms. — AFP
BEIJING: Goldman Sachs Group Inc says China may end its zero-Covid policy before April, earlier than expected, with a “disorderly” exit possible due to tighter virus controls, which have sparked protests across the country.
The bank forecasts a 30% probability of China reopening before the second quarter of 2023, chief China economist Hui Shan wrote in a note on Sunday.
“The central government may soon need to choose between more lockdowns and more Covid outbreaks,” she wrote. Local governments have struggled to “quickly” control the virus’s spread while adhering to new measures that necessitate a more targeted approach.
The economy has been roiled by zero-Covid, with increasingly strict controls curbing people’s mobility and business activity, undermining economic growth. The curbs have prompted demonstrations in major cities, including Shanghai and Beijing, over the weekend.
Economists at Commerzbank AG and elsewhere have cited “growing discontent” over zero-Covid as a sign of the pressures facing authorities.
“The current situation highlights the challenge that China faces in maintaining zero-Covid while attempting to implement less stringent measures,” Commerzbank economists wrote in a note yesterday.
Chinese stocks were the worst performers in Asia yesterday as investors trimmed holdings, concerned that the protests are creating more uncertainty for the nation’s path towards reopening.
The benchmark CSI 300 Index fell as much as 2.8% in early trading, the steepest drop in more than a month. The onshore yuan weakened as much as 1.1% to 7.24.35 per US dollar (RM4.52.5), the biggest depreciation since May.A recent 20-point playbook unveiled by the government seemed aimed at easing some of the strictest controls in China, but many cities have continued to lock down communities to control the virus as cases surged to record levels.
Figuring out how to quell the outbreaks while also implementing the new measures is “the source of confusion,” said Larry Hu, head of China economics at Macquarie Group Ltd.
“Without clear guidance from the top, local officials are inclined to play it safe by sticking to the existing zero-Covid stance,” he wrote in a report, adding that “it upset many people” who expected more loosening.
Hang Seng Bank Ltd chief China economist Dan Wang said it’s “unlikely,” though, that there would be a gradual reopening given the quick rise in cases.
A “rapid or reckless reopening” would be worse for China’s growth, she said in a Bloomberg TV interview yesterday.
If the Covid policy is relaxed too quickly, there’s a risk of a jump in deaths, as was the case in Beijing recently, she said. “That could result in a very awkward position for a lot of local governments when it comes to the priorities of their industrial reopening.” — Bloomberg
