China: focus on growth

In recent weeks, the Chinese government has made a dramatic turnaround in its handling of the Covid-19 pandemic, relaxing a range of measures aimed at preventing the spread[1] of the virus. After a first recalibration, on November 11, the health authorities announced, on December 7, the implementation of a much more flexible protocol. This includes major changes to testing, quarantine and containment policies.

It is no longer necessary to present negative tests to access most public places or for inter-regional travel. Large-scale screening campaigns are abandoned. “Contact cases” and people with mild or moderate disease now have the option of self-isolation at home rather than in quarantine centres. The use of containment is prohibited in low-risk areas and must be highly targeted in high-risk areas.

Official figures show a decline in infections since restrictions were eased. However, these figures are difficult to interpret as the number of tests has fallen sharply and asymptomatic cases are no longer counted. The authorities have also changed the way they count deaths, adopting a stricter definition than the previous one and international standards. Only people who have died from Covid-related respiratory failure are now counted in the statistics.

Under these conditions, it becomes very complicated to follow the evolution of the epidemic situation in China.

Nevertheless, returns from the field indicate a sharp increase in infections and an increase in deaths, particularly in Beijing. The indices of road traffic and metro ridership show that the deterioration of the epidemic situation is leading the population to reduce their trips to the most affected cities. On the other hand, intercity and air traffic seem to be recovering.

By abandoning the “zero-Covid” policy, the Chinese authorities wanted to give priority to growth, a message confirmed at the annual economic conference on 15 and 16 December. Ultimately, this should allow a rebound in activity but uncertainties persist in the short term. Will the easing of restrictions lead to a health disaster? What impact on labour supply, consumer behaviour and production? Could the authorities back down? The answers to these questions will determine the pace and extent of China’s economic recovery.

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The opinion expressed above is dated December 23, 2022 and is subject to change.

This document has no pre-contractual or contractual value. It is given to its recipient for information purposes. The analyses and/or descriptions contained in this document should not be interpreted as advice or recommendations from Lazard Frères Gestion SAS. This document does not constitute a recommendation to buy or sell, nor does it constitute an investment inducement. This document is the intellectual property of Lazard Frères Gestion SAS. LAZARD FRERES GESTION – S.A.S with a capital of €14,487,500 – 352 213 599 RCS Paris 25, RUE DE COURCELLES – 75008 PARIS.

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