China Will Fully Reopen by Mid-2023, Bloomberg Economics Says - BLOOMBERG
NOVEMBER 30, 2022
(Bloomberg) -- China will gradually relax Covid containment measures over the next seven months, resulting in a full reopening by mid-2023, Bloomberg Economics forecasts.
“Our view is that by the end of the first half of next year, the economy will be free of any material Covid curbs,” Economists Chang Shu and David Qu wrote in a report Wednesday. “An acceleration -- either by design or not -- is more likely than a deceleration.”
The government is likely to gradually relax quarantine requirements for Covid cases and their close contacts and ease restrictions on domestic travel between different areas of the country, they wrote.
Authorities will also work to get vulnerable groups vaccinated and prepare more medical resources, they wrote. Educational campaigns will also be used to alleviate public concerns over catching Covid.
Read more: Softer China Stance on Covid Emerges in Media, Official Rhetoric
Recently the government has been trying to reduce the impact of its Covid Zero policy on people and the economy without letting infections get out of control. The relaxation and limiting of some controls has prompted optimism that the country is on the road to reopening at some point, although the changes so far have been minimal.
However, the effect on the economy of the existing controls isn’t minimal, with the latest economic data showing activity contracted further in November amid the current record Covid outbreak.
Nomura Holdings Inc. economist Lu Ting wrote that while he thinks Beijing is more likely to start a real opening after March 2023 and poor economic data may help officials make the decision, the issue should be treated with caution. “Beijing’s policymakers might still think differently when being faced with these deteriorating activity data and rising Covid cases,” he wrote in a note Wednesday.
On Tuesday, the national health authorities said they will work to increase vaccinations of senior citizens, a move regarded by health experts as crucial to preventing a massive increase in illness and death as the nation reopens. The officials also emphasized an order for local governments to avoid over the top controls following protests over the weekend and resistance to lockdowns.
“Recent protests suggest widespread frustration with the economic and social costs of Covid Zero,” wrote the Bloomberg economists. “But a significant share” of the population probably has reservations about a swift reopening, given the country’s success in keeping fatalities low so far.
A survey by Bloomberg News earlier this month shows most economists think reopening will begin in the second quarter of 2023, after the parliamentary meeting which usually happens in early March. The Chinese government has given no public indication on the timing of an exit from the current policy.
In the final pivot to “living with the virus,” the government might tolerate regions reopening at a different pace depending on their local conditions, given the imbalances in the distribution of medical resources across China, according to the report.
A milder strain of the virus or better preparedness may lead to a more benign outcome of an early reopening, benefits to the economy and lower pressure on public health resources, the economists said.
However, in a “less-controlled” scenario, a rapid spread of the virus may strain medical resources and lead to a quicker reopening, boosting growth but with higher costs to public health, they said.
Goldman Sachs Group Inc. expects a reopening during the second quarter of next year, although it said there’s a 30% probability it may be earlier, including some chance of a “disorderly” exit. Goldman called their forecast a “subjective probability” and didn’t explain how they reached it.