Hopes of China easing Covid restrictions further take hold as market observers detect a delicate shift in tone
- While Beijing is committed to a zero-Covid policy, there are signs that a full reopening of the economy is on the cards amid a subtle shift in official tone
- Authorities have asked local governments to be ‘more precise’ in pandemic prevention and have tolerated some social media posts questioning the restrictive policies
Traders and analysts have noticed subtle hints of relaxation to China’s official zero-Covid approach that underpinned a US$1.2 trillion rally in Chinese stocks in both onshore and offshore markets over the past week.
Market participants have been reading between the lines from top health officials’ comments on pandemic prevention at a press conference over the weekend. While Beijing has maintained that it would uphold its zero-Covid policy, that has barely cooled buying interest.
Financial institutions from Citic Securities to Growth Investment Group and researchers at Alpine Macro say that signs are now pointing to a full reopening of the economy, citing a subtle shift in the government’s stance on Covid curbs.
Top health officials at the conference said that local governments would be required to be “more precise” in pandemic prevention and stressed that they would be penalised for doubling down on quarantine measures. Several cities that put in place excessive restrictions were singled out for criticism, including Zhengzhou in central Henan province. The city was in the spotlight for its measures to contain a recent flare-up in cases. Workers were seen fleeing the world’s biggest iPhone assembling plant after authorities imposed severe restrictions.
01:33
Chinese workers flee world’s largest iPhone factory after Covid outbreak
That is a sign to some investors and analysts that Beijing has begun softening its tough stance on zero-Covid.
“The recalibration of the pandemic prevention measures is actually going on,” said Qiu Xiang, a Beijing-based analyst at Citic Securities, China’s biggest publicly traded brokerage. “The negative impact of the pandemic on the economy will fade and a recovery of the economy is expected.”