China's Xi Jinping indicates modifications in Covid strategy amid latest COVID-19 outbreak
Three weeks ago, China reported under 100 Covid cases per day, but that number has now surpassed 1,000 cases per day for the past week.
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FollowChinese President Xi Jinping has vowed to ease the economic impact of his Covid fighting measures, signalling a shift in a longstanding strategy that has reduced fatalities but weighted heavily on the world's second-largest economy.
Restating the commitment to its Covid-Zero policy, China will strive to achieve the maximum prevention and control effect at the least cost and minimise the impact of the epidemic on economic and social development; Xi stated while in a meeting late on Thursday of the politburo standing committee, the Communist Party's highest decision-making body.
As per Bloomberg's search of the government website, this is the first time that Xi has emphasised easing the economic cost of Covid prevention at a politburo meeting since the pandemic in 2020. China is dealing with its worst Covid-19 outbreak since the original in Wuhan, with tens of millions of people, including residents of the southern tech hub of Shenzhen, under lockdown.
China has stated that virus controls should be coordinated with economic development as a part of the pledge to stabilise financial markets and stimulate the economy. The remark made at a recent meeting of China's top financial policy committee reiterated what officials have been stating from the past months: Covid's policy needed to be tweaked to reduce disruption for business.
People familiar with China's thinking have told Bloomberg News that China is unlikely to ease up on Covid Zero until 2023, owing to the need for stability in a politically important year for Xi.
The head of macro and strategy research at China Renaissance Securities Hong Kong Ltd, Bruce Pang, stated that signals from Xi's meeting suggest China will preferably eliminate infections and then adjust its virus control strategies. Phrases in the statement implying that China should not relent in its fight against the virus imply that "any adjustment will come with the precondition of eliminating infections," he added.
Many economists, including Morgan Stanley and USB Group AG, have recently downgraded their growth forecasts for the year, stating Beijing's target of about 5.5 per cent expansion will be challenging to achieve. Hui Shan, head of China economist Goldman Sachs Group Inc. and colleagues estimate a four-week lockdown of 30 per cent of the country could reduce gross domestic product by around one per cent point.
Virus controls have resulted in temporary factory shutdowns at companies such as iPhone manufacturer Foxconn Technology Group and Toyota Motor Corp. Consumers have seen a drop in travel and spending at stores and restaurants due to the restrictions, with sentiment remaining low compared to pre-pandemic levels.
In another positive sign, the government announced on Friday that Shenzhen's southern Chinese technology hub would reopen factories, buses, and subways in five districts after meeting their Covid targets.
Xi stated that Beijing also wishes to see minimal disruption to people's lives; China should maintain the stability and order of the people's normal production and life, do a good job in the production and supply of daily necessities, and ensure people's medical needs.
Xi called for a step-up in public education and promotion of the benefits of teh doses and a further improvement in vaccination rates. He also urged scientific and technological research and developer to strengthen vaccines.
Nomura Holdings Inc. stated China's focus on developing its home-grown vaccines, which remains uncertain, suggest it's not ready to exit the Covid Zero strategy this year.
The statements are neither a sign of exiting the current 'dynamic zero-Covid strategy' nor a roadmap of shifting to a living-with-Covid strategy, as noted by Nomura's chief China economist Lu Ting and colleagues.
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