China may have ‘passed the point of no return’ as Covid infections soar

Surging Covid infections across mainland China make it harder for the government to achieve zero-Covid without reverting to a harsh lockdown, Macquarie’s Chief China Economist Larry Hu said.

In the last few days, the daily case count has climbed to around or more than 28,000 — near levels seen in April during a stringent lockdown in Shanghai, according to CNBC calculations of Wind Information data. The figures showed the last time mainland China saw only a handful of daily infections was in June, shortly after Shanghai eased its restrictions.

The latest Covid wave has hit the southern city of Guangzhou, the capital city of Beijing and many central parts of China — prompting local officials to tighten restrictions on business and social activity this month.

“China might have already passed the point of no return, as it’s unlikely to achieve zero Covid again without another Shanghai-style hard lockdown,” Hu said in a report Tuesday. “What policymakers could do now is to slow the spread of virus, i.e. flatten the curve, by tightening the Covid controls for the time being.”

Hu pointed to slight changes this month in government policy and propaganda as signs authorities are preparing for reopening in the next six to nine months. But he noted that “the road to reopening is set to involve lots of back-and-forth.”

Markets have speculated for weeks about the timing of China’s departure from its stringent zero-Covid policy. The controls have weighed on the economy, which barely eked out growth while Shanghai was locked down and has posted growth of only 3% during the first three quarters of the year.

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