China’s Covid lockdowns are having a lessening impact on its economy

Local residents are pictured here on Dec. 5, 2022 in a subway in Zhengzhou, Henan province, after the municipality announced that negative nucleic acid results are no longer required to board public transportation.

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BEIJING – China’s Covid-19 lockdown is easing its impact on the economy for the first time since early October, according to Nomura.

However, analysts at the Bank of Japan have warned that the road ahead will be difficult as China appears unprepared for a surge in infections.

As of Monday, the negative impact of China’s handling of Covid on its economy fell to 19.3% of China’s total GDP, down from 25.1% a week ago, Ting Lu, chief China economist at Nomura and Group, said in a report.

According to Nomura’s model, last week’s 25.1% figure was higher than Shanghai’s two-month blockade in the spring. At the beginning of October, this figure was close to 4%.

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In the past few days, local governments have eased virus testing requirements, allowing people in cities such as Beijing and Zhengzhou to board public transport without proof of a negative test result.

China seems ill-prepared for a massive wave of Covid infections, and it may have to pay for its procrastination in adopting a ‘Living with Covid’ approach.

If they test positive for Covid-19, Beijing residents are at least being quarantined at home rather than in a centralized facility.

On Tuesday morning, the city of Beijing announced that proof of a negative Covid test within two or three days would not be required to enter public spaces such as shopping malls. However, the level of initial implementation varied.

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China has shown signs that it may be on its way to gradually easing its strict Covid controls. In the middle of November, the quarantine time in the country was reduced. Last week, the Deputy Prime Minister downplayed the seriousness of the Omicron option.

China is moving cautiously toward reopening

However, the country has reported an increase in viral infections in the past few weeks, reaching record daily levels. In recent days, the number of cases has decreased after mandatory testing for the virus was reduced.

Nomura analysts said: “The end of zero is encouraging and should be very positive for markets, but we caution that the road to a reopening could be slow, painful and murky.”

“Despite the significant resources invested in the severe ZCS over the past two years, China appears to be ill-prepared for a massive wave of Covid infections and may have to pay for its procrastination in adopting a ‘live with’ Covid approach.”

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Control of Covid varies by city and district in China. More restaurants in Guangzhou can continue to offer take-out, while most in Beijing offer take-out.

Schools in both cities remain mostly online.

Analysts at Nomura said around 452.5 million people are affected by the current lockdown measures, but that’s up from 528.6 million a week ago.

Although these numbers exceed the population of many countries, they represent only one-third of China’s population.

Why is China its own

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

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