A growing number of investment banks are expecting China to ease Covid restrictions in the first half of next year, with Bloomberg reporting “Morgan Stanley Joins Chorus Expecting China to Open Spring 2023” this week.
Ongoing zero Covid measures have taken a toll on the economy and have also negatively affected agricultural demand. However, while China may ease some of its Covid restrictions next year, it is unlikely that there will be a sudden reopening and return to pre-Covid levels of demand.
Policy makers are likely worried about a repeat of the situation in Hong Kong. The city, which runs its health policy separate from the mainland, saw its daily per-capita Covid deaths spike to the highest in the world in March as it eased restrictions.
While Hong Kong’s cumulative per-capita deaths remain far below other countries, the sudden surge of infections overwhelmed the healthcare system. The outcome would be much worse if a similar situation played out in mainland Chinese cities with health care systems far less advanced than Hong Kong.
There is also not a concentrated drive to vaccinate elderly populations. A small attempt to implement a vaccine mandate in Beijing was quickly withdrawn after public pushback. As China’s homegrown vaccine requires three doses to achieve an efficacy close to two doses of mRNA vaccines, this also pushes out the time window for reopening even if the government imposed a vaccination mandate.
China has also invested heavily in Covid infrastructure. This includes testing sites across major cities, mobile phone apps for health codes, extensive contract tracing systems, and quarantine centers. Even if the target of zero Covid is changed, the government will still want to use this infrastructure to minimize cases and control the speed and scope of any outbreaks.
At present, there is no official guidance on when, how, or if China will ease its zero Covid restrictions. Even a summary of the Bloomberg article posted on messaging app WeChat was taken down for violating regulations. However, based on the previously mentioned factors, any easing of restrictions should be expected to be slow, gradual, and unlikely to rapidly boost demand.