China’s Pfizer drug approval raises hopes of a tourism rebound

China’s Food and Drug Administration has given conditional approval for Pfizer’s Covid treatment pill Paxlovid.

Stocks of tourism and hotel companies surged on Monday with many rising to the 10% limit-up, on hopes that this marks the beginning of a tourism rebound.

Domestic spending on tourism and restaurants has plunged in the past 20 months, following delta, and then omicron, Covid variants entering China.

Following the approval of this new drug, many local brokers are improving their ratings of shares of companies in tourism, hotels, airports, airlines, and restaurants.

Mingsheng Securities mentioned national hotpot chain Haidilao as a stock to look at once China eases many of the Covid-related restrictions.

Haidilao recently had to close 300 stores across the country due to low traffic as consumers have been staying at home more.

However, it seems unlikely that the conditional approval of a single drug is going to dramatically change consumer demand in the tourism and restaurant industries.

First, it is unlikely for China to quickly open up its borders even if there is a high level of vaccinations and effective drugs to treat Covid. Both Australia and Singapore saw dramatic increases in cases and deaths after opening up, and that likely gives pause to policy makers in China.

Hong Kong will be an interesting and closely monitored test case, as the city reported a daily record of 3,000 cases on Sunday and looks to be moving more of a ‘living with Covid’ situation.

Secondly, consumer habits are difficult to change. People in China are still very concerned about Covid, and have spent most of the past 2 years staying close to home, or just staying home.

China is very slowly trying to move away from its zero-Covid approach, but it is unclear if there will be a strong surge of consumer demand for restaurants and tourism when the policy eventually shifts.