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China withdraws from sweeping zero-Covid policies as economic toll rises

China withdraws from sweeping zero-Covid policies as economic toll rises

China has announced sweeping relaxations to President Xi Jinping’s controversial zero Covid restrictions, including home quarantine for the first time, as new evidence emerged of the economic damage wrought by pandemic controls.

The new measures, outlined by the State Council, China’s cabinet, on Wednesday were announced by a meeting of the political bureau of the Chinese Communist Party which stressed the importance of stabilizing the economy rather than fighting the Covid -19.

They include the first explicit central government approval to isolate asymptomatic or mild cases of coronavirus at home rather than in hospitals or centralized quarantine facilities. Some local authorities had experimented with similar measures in recent days.

The State Council also said people should not have to show proof of a negative test before entering most public places – a relaxation recently implemented by cities like Beijing and Shanghai despite the concerns that the rapid spread of Covid could overwhelm the medical systemespecially in the poorest rural areas.

In Hong Kong, the benchmark Hang Seng closed down 3%, while the CSI 300 index of stocks listed in Shanghai and Shenzhen edged down 0.3% on the same day as November trade data. showed the biggest drop since 2020.

At its previous meeting, the 24-member political bureau, chaired by Xi, said the government would “optimize epidemic prevention and control” as it tries to stabilize an economy that grew 3% on a year in the first nine months of 2022, well below Beijing’s year-end target of 5.5 percent.

Xi had previously declared Covid to be an “evil virus” that only “all-out people’s war” could defeat.

Chen Long of Plenum, a Beijing-based consultancy, said zero-Covid’s demise was evident in the changing tenor of comments from officials and state media on the threat posed by the virus over the past few years. last weeks. He added that ending all restrictions would not be a smooth process, “but we are going for it, firmly, and there is no turning back”.

Bert Hofman, director of the National University of Singapore’s East Asia Institute, said the new guidelines were “a major milestone”.

“They outline a major zero-Covid easing and provide centralized guidance for local governments to follow,” Hofman added.

“While there are still many challenges ahead, this is a clear step towards greater openness and minimizing the impact of Covid control on society and the economy.”

China’s November trade data, also released on Wednesday, provided the latest example of the pressure on its economy, with exports and imports both contracting by their biggest margins in several years following weakening global demand for its goods.

The country’s dollar exports fell 8.7% year on year to $296 billion, the biggest drop since the start of the pandemic in January 2020 and well below expectations for a 3.5% decline . Imports fell 10.6% to $226 billion, the most in two and a half years.

In October, exports and imports fell by only 0.3 and 0.7%respectively.

The declines highlight the vulnerability of Chinese trade to falling foreign demand as other major economies raise interest rates, while Covid restrictions weigh on a fragile domestic economy.

China’s exports to the rest of the world soared early in the pandemic, boosted by international demand for goods during lockdowns. But this strength has faded in a context of broader economic tension due to a real estate crisis and the zero-Covid approachwhich reduced economic activity.

The trade data was recorded during a wave of tough measures in November as authorities grappled with multiple outbreaks in Guangzhou, Beijing and a Foxconn factory in Zhengzhou city before finally switching to relaxation.

“As global demand weakens in 2023, China will need to rely more on domestic demand,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, who also expects exports to remain weak. in the coming months as the country “goes through a bumpy reopening”. treat”.

Wednesday’s trade figures were the latest in a series of negative data linked to Chinese economywhich increased by 3.9% in the third quarter.

Domestic consumer demand remained weak due to frequent citywide shutdowns imposed by zero-Covid, with retail sales contracting 0.5% year on year in October.

Julian Evans-Pritchard, senior China economist at Capital Economics, said the import data reflected “weaker domestic demand amid widespread virus containment and a weak housing sector.”

“A move away from zero-Covid will boost domestic demand over the medium term,” he added. “But the transition to life with the virus will likely take time.”

The country’s trade surplus was $70 billion, down 2.5% from the same period last year.

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