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As zero-Covid ends abruptly, China’s economy is living its darkest hours before the dawn
- What was assumed to be a gradual reopening has turned into a sprint to the exit. This means deeper near-term disruptions but the rebound is also likely to be more vigorous
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Aidan Yao is a senior investment strategist for Asia at Amundi, based in Hong Kong.
China has entered 2023 with trepidation. While the abrupt end to the zero-Covid strategy has boosted market confidence in better economic conditions ahead, it has also cost society, with the public health system under significant pressure amid surging infections. With the situation still very fluid, any forecasts need to be constantly revisited as conditions evolve.
The situation is murky from a public health standpoint. The halting of daily data updates on Covid-19 cases and deaths has left the market flying blind on where the nation is along the infection cycle. Indeed, with mass testing no longer being carried out and a self-reporting system yet to be established, it is challenging even for the government to gauge the true picture.
The former chief epidemiologist of the National Health Commission, Zeng Guang, estimated that over 80 per cent of residents in Beijing (a city of 22 million) had contracted the virus by the end of last month, and that over 40 per cent of China’s entire population (roughly 600 million) might have been infected.
The economy is living its darkest hours before the dawn. November’s activity data nosedived, and December purchasing managers’ indices (PPIs) show a continued contraction. When the fourth quarter gross domestic product data comes in, it is expected to show a dreadful end for the economy in 2022.
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