Reopening rumors push stocks higher but negative impact impacts likely to continue

Travel, tourism, and restaurant industry stocks surged on Tuesday following rumors that the central government had formed a committee to plan “reopening” from China’s current zero covid policy potentially in March 2023.

While China’s government is likely looking at plans to eventually reopen, it seems unlikely that any reopening would be sudden or provide a sharp boost to demand and economic activity.

On Tuesday, Dandong, in Liaoning province, announced a three-day citywide lockdown after finding a single asymptomatic case. 

Other areas which have seen sharp rises in cases seem concerned about the economic impacts of widespread restrictions following a small number of cases. 

In Inner Mongolia, the Party sectary said that restrictions should be more scientifically and accurately deployed and that entire communities should not be locked down by “indiscriminate and endless controls” because of one or two infections. 

In Henan, the governor made similar comments and said it was important that communities not be locked down indiscriminately and more scientific measures were necessary for cities to “regain their vitality”.

In the absence of any official guidance on easing restrictions, the negative impacts on demand should be expected to continue.

The national railway operator said that in the first 9 months of 2022, the total number of trips was 1.33 billion, down 33.3% compared to the same period in 2021. Freight volumes rose 6.3% and the operator has seen losses of 94.7 billion yuan year to date.