China Eases Covid-19 Restrictions: Markets Rejoice!

New Cases

The official figure for daily new cases of Covid-19 declined for the eighth day in a row on Wednesday, to 25,115, with no deaths. However, the numbers have continued to fall as the government phased off near-daily testing in cities across the country.

However, according to experts, the actual number of cases is likely much higher and still rising, and could soon escalate into a severe public health crisis as a result of testing cuts and the easing of travel across the country.

Anne-Marie Brady, a specialist in Chinese politics at the University of Canterbury, commented that Omicron is much too infectious to be contained. The problem is that China does not have enough ICU beds to deal with a mass outbreak, and there is relatively little natural immunity within the population. As a result, China has begun attempts to immunize its under-vaccinated older population and front-line healthcare personnel across the country as it has relaxed restrictions.

Saving The Economy

However, the furious demonstrators aren't the only ones calling for an end to zero-Covid. Six renowned Chinese economists released a joint statement on Saturday outlining a seven-point strategy to revive the country's economic activities responsibly but swiftly.

Among the authors of the letter were three deans of leading Chinese universities. The strategy was published on the WeChat account of Ren Jeping, who is considered China's "famous economist”. The letter emphasizes the need for state support for private firms, manufacturing, and real estate, all of which have been hit hard this year amid severe virus restrictions.

Stocks in mainland China and Hong Kong started to gradually gain since the softening measures in late November.

Leland R. Miller, CEO of consultancy China Beige Book said that what's remarkable about the recent surge in Chinese equities is that the rapid rally in stocks seems to be causing investors to lean more and more toward bullish sentiment in the economy.

"That's a risky mindset, and not just because it's in no way justified by the economic data, which is currently awful. It's also a bet that major lockdowns won't return as Covid spreads this winter," he told Barron's.

Other analysts believe that, while it will take more time, China's wounded economy will begin to recover.

"If China re-connects with the world with fewer restrictions in 2023," said Bruce Pang, chief economist of Greater China at Jones Lang, its economy would speed up again — on the strength of greater expectations, stronger consumption, less-disrupted cross-border supplies, and more extensive investments.