China’s economic woes seen persisting despite ‘turning point in macro policies’

A market rally that started on Friday continued on Monday, with the yuan seeing its strongest close against the US dollar since September 20

But investors remain wary in the face of coronavirus restrictions and disruptions, believing the zero-Covid policy has become ‘a test of pragmatism for Beijing’, economist says

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A pandemic-prevention worker stands near a locked-down apartment compound in Beijing on Saturday, a day after the State Council issued 20 measures to ease some coronavirus controls. Photo: Reuters

Published: 6:30am, 15 Nov 2022Updated: 1:00pm, 15 Nov 2022

Despite Beijing’s fresh signals that it will ease both coronavirus controls and curbs on the property sector – two of the biggest economic drags for China in the past year – analysts say that the economy’s sluggishness may extend well into 2023.

A 16-point plan to support the property sector, along with 20 measures to ease some of the country’s stringent coronavirus rules – including slashing quarantine times for close contacts and overseas arrivals – have been unveiled since late last week.

The 20 coronavirus measures, announced by the State Council on Friday, triggered a market rally that continued on Monday after news of the 16-point plan – jointly formed by the central bank and the China Banking and Insurance Regulatory Commission – came out over the weekend.

The yuan has also been regaining a bit of ground that it recently lost to the US dollar, finishing the domestic session on Monday at 7.0378 to the dollar – the yuan’s strongest such close since September 20.

“Last week was a major turning point in macro policies in China,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management, adding that the announcements “help reduce policy uncertainty in the market”.