China’s sudden “reopening” reveals new economic challenges

China’s sudden “reopening” reveals new economic challenges

China’s sudden “reopening” reveals new economic challenges

People line up outside a fever clinic in Beijing December 14, 2022, just days after the country eased Covid controls in sub-zero weather in the capital.

Yuxuan Zhang | afp | Getty Images

BEIJING – Mainland China’s swift withdrawal of many Covid-related restrictions was unexpectedly abrupt, revealing a new set of economic challenges.

Over the past two weeks, local and central government authorities have relaxed several measures that had forced many people to stay at home and businesses to operate mostly remotely. Notably, the central government said last week that negative virus tests and health code checks were no longer required for travel nationwide.

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Meanwhile, reports of local sick people have increased. The city of Beijing said its fever clinics received 22,000 visits on Sunday, 16 times more than a week ago.

“This reopening has come quite suddenly and quite decisively. It has exceeded our expectations,” said Gang Yu, co-founder and executive chairman of 111, an online seller of medicines and health services. That’s according to a CNBC translation of his comments in Mandarin.

Shortage of personnel and medicines

Since the end of November, orders for fever-reducing products and related medicines have increased tenfold, Yu said in a telephone interview on Thursday. She said there is an “extraordinary shortage” of drugs that factories cannot keep up, a situation she expects will last for at least another three to four weeks.

In addition to the high demand, dozens of workers in warehouses or 111 offices in different parts of China have tested positive for Covid, creating an “extraordinary shortage” of personnel, Yu said.

That’s a different challenge than earlier this year, when widespread Covid lockdowns meant thousands of new orders were stranded at different distribution outlets every day, Yu said.

China will weather the Covid reopening, but it will be a bumpy ride

Delivery is even slower than normal in some parts of the country.

Also as of Sunday, China’s postal agency said more than 400 distribution points in Beijing and other parts of the country remained closed for Covid-related reasons.

For a sense of scale, the Postal Service said Tuesday it was handling more than 360 million packages a day, or more than one package per person in the U.S.

We believe that incoming migration during the Chinese New Year holiday in late January could cause an unprecedented spread of Covid and severe disruption to the economy. announced Wednesday that more than 1,000 couriers from other parts of the country had arrived in the capital Beijing. Anecdotally, in recent days in Beijing, app-based food and grocery services that typically deliver within the hour only did so at much longer intervals or the next day.

Rising infections may offset the easing

“In the past two weeks, the Chinese government has made a sudden 180-degree turn to end its zero Covid policies, with most domestic prevention measures completely abandoned,” China’s chief economist Nomura Ting said on Thursday. Lu and a team in a relationship.

“The increase in Covid infections could offset the positive impact of short-term easing.”

“The rapid surge of infections in big cities could be just the beginning of a massive wave of Covid infections,” analysts said.

“We expect major activity indices to remain weak or even decline further in December. We believe that incoming migration during the Chinese New Year holiday in late January could cause an unprecedented spread of Covid and severe disruption to the economy.”

China on Thursday recorded a worse-than-expected drop in retail sales in November, as well as slower growth in industrial production and fixed asset investment.

Get through the winter early

Social activity remains subdued due to the surge in infections and sub-zero weather in northern cities. Traffic data from Baidu indicates that most people in big cities like Beijing and Guangzhou haven’t ventured out, with congestion levels still very low as of Thursday.

The management of Chinese travel booking site was also reserved for the resumption of domestic travel.

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“We’ve actually seen a very strong sequential increase in domestic flights and hotel bookings over the last couple of weeks,” they said Thursday, according to a transcript of earnings calls from FactSet.

“But in the near term, we’re still cautious as winter is usually a flat season for both business and leisure travel,” they said.

“And it may also take some time for people to get over the first wave of infections before travel demand can fully unwind and recover. But we expect to see a nice rebound and growth in the domestic travel segment next year.”

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