As Chinese cities ease Covid restrictions, the sputtering economy may take months to catch up
- More mixed economic indicators are expected, and the supply chain remains at risk as ‘lots of people will get sick’
- China’s reopening path still faces considerable hurdles, but for now the policy easing has begun to lift market sentiment and strengthen the yuan
As China continues to grapple with subdued economic activity, analysts warn that the outlook for the coming months remains murky and potentially even more problematic as a loosening of coronavirus controls has led to a resurgence of infections.
China is currently seeing a mixed bag of local coronavirus responses, as relaxed controls are prevailing across major metropolises while restrictions are tightening in other regions.
Several local governments said testing should be conducted only on people at risk. And in some cities, close contacts and those who test positive are no longer required to go to centralised facilities.
The policy easing has lifted market sentiment, as seen in the strong equity market rebound as well as bullish yuan upticks.
The market rally came as the reopening process has become much more certain than before, and the policies are increasingly unlikely to reverse and go back to lockdowns again, said Zhang Zhiwei, chief economist at Pinpoint Asset Management.