"China's Path to With-Corona Is Rough, Slow, and Costly"

Economists: "Complete Economic Recovery Is Far Off"
EU Chamber of Commerce in China: "At Least One Year Wasted Preparing for Herd Immunity"

[Image source=Yonhap News]

[Asia Economy Beijing=Special Correspondent Kim Hyunjung] Although there are signs of easing zero-COVID policies in China following large-scale protests, economists predict that it will take time for China to transition to a with-COVID approach, and the path will not be smooth. In particular, since China missed the opportunity to achieve herd immunity over the past three years, it is difficult to expect a complete economic rebound in the short term.

According to the South China Morning Post (SCMP) in Hong Kong on the 2nd, Lu Ting, Nomura Securities' Chief China Economist, warned in a recent report that "China's path to with-COVID will still be bumpy, slow, and costly." He forecasted, "True with-COVID can only begin after zero-COVID ends and the number of confirmed cases sharply decreases," adding, "Only then will a clear economic rebound appear."

This statement came amid concerns over increased volatility in stock prices and exchange rates due to rising expectations for China's reopening, following Vice Premier Sun Chunlan's remarks at a National Health Commission forum on the 30th of last month that "China's epidemic prevention has entered a new phase." In fact, the Hong Kong H-Share Index, composed of mainland Chinese companies listed in Hong Kong, rose 29% last month?the largest increase since 2003?and closed 0.2% higher on the first trading day of this month. On the 1st, the People's Bank of China, the central bank, set the yuan's reference exchange rate against the dollar at 7.1225 yuan, marking a 0.76% surge in the yuan's value compared to the previous day.

Christina Un, strategist at global investment firm Standard Life Aberdeen (Abrdn), told Bloomberg News, "Recent statements from China have given investors confidence that zero-COVID is nearing its end, but the path to full reopening is more likely to be gradual, and the situation in the meantime could be unstable." Craig Erlam, analyst at currency data firm Oanda, emphasized, "We should not view reopening expectations naively."

The European Union Chamber of Commerce in China also pointed out in a recent report that "the Chinese government wasted more than a year of opportunity to lay the foundation for herd immunity," warning that "if epidemic prevention is lifted before then, there is a risk of a resurgence in confirmed cases." It further stressed, "Vaccination campaigns must be conducted not only for the elderly but for the entire population," adding, "Otherwise, it will place a huge burden on the healthcare system and could lead to controls that further disrupt supply chains, as witnessed in the first half of this year."

Investment banks expect that China's economic growth rate next year will find it difficult to rebound sharply. Goldman Sachs and UBS forecast China's gross domestic product (GDP) to grow by 4.5% next year, while Nomura offered a more conservative estimate of 4%. Morgan Stanley projected 5% growth.

This content was produced with the assistance of AI translation services.