China’s Covid lockdowns have less impact on its economy

Pictured are residents of the metro in Zhengzhou city, Henan province, on December 5, 2022, after the municipality said negative nucleic acid test results were no longer required to ride public transport in common.

CGV | Visual Group China | Getty Images

BEIJING — China’s Covid lockdowns are having a lesser impact on the economy for the first time since early October, according to Nomura.

However, analysts at the Japanese bank have warned that the road ahead will be difficult as China does not appear ready for a surge in infections.

On Monday, the negative impact of China’s Covid controls on its economy fell to 19.3% of China’s total GDP – from 25.1% a week ago, Nomura’s chief economist said. China, Ting Lu, and a team in a report.

Last week’s figure of 25.1% was higher than that seen during Shanghai’s two-month lockdown in the spring, according to Nomura’s model. In early October, the figure was much lower, close to 4%.

In recent days, local governments have relaxed some virus testing requirements, allowing people in cities like Beijing and Zhengzhou to take public transportation without showing proof of a negative test result.

China does not seem well prepared for a massive wave of Covid infections, and it may have to pay for its procrastination by adopting a “living with Covid” approach.

If they test positive for Covid-19, people in Beijing at least are increasingly being quarantined at home instead of being forced to do so in a centralized facility.

On Tuesday morning, the city of Beijing said proof of a negative Covid test within two or three days was no longer required to enter public spaces such as shopping malls. But the level of initial implementation varied.

China has shown signs that a gradual relaxation of its strict Covid controls may be underway. The country reduced quarantine times in mid-November. Last week, a deputy prime minister downplayed the seriousness of the Omicron variant.

China moves towards cautious reopening

However, the country has also reported an increase in virus infections which have reached daily highs in recent weeks. The number of cases has fallen in recent days, amid a drop in mandatory virus testing.

“The end of Covid zero is encouraging and should be quite positive for markets, but we warn that the road to reopening could be gradual, painful and bumpy,” Nomura analysts said.

“Despite the substantial resources devoted to the authoritarian ZCS over the past two years, China does not seem well prepared for a massive wave of Covid infections, and it may have to pay for its procrastination in adopting a ‘living with it’ . The Covid approach.”

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Covid checks vary widely between cities and districts in China. More restaurants in Guangzhou city can resume dine-in, while most in Beijing only offer takeout.

Schools in both cities remain largely online.

About 452.5 million people are affected by the current lockdown measures, though down from the much higher 528.6 million a week earlier, Nomura analysts said.

While these numbers exceed the population of many countries, they only reflect about a third of China’s.

Why China shows no signs of backing down from its strategy

— This story has been updated to reflect that Beijing no longer needs proof of a negative Covid test within two or three days to enter certain public places.

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