China is not letting up any time soon on its highly restrictive Zero Covid policy. Speculation had focused on the possible easing of restrictions after the once-in-five-years Communist Party Conference starting this Sunday. However, the recent rise in cases has resulted in a doubling down of curtailed travel across the country, no relaxation of restrictions at the border, and increasing testing requirements of Chinese citizens.
Amid a surge of infections in Inner Mongolia and the far west Xinjiang region as domestic travel climbed during the National Day holiday this past week, the Chinese government has recorded 2,089 new cases as of 10/10.
Across the country, examples of travel limitations and shutdowns abound: the southwest city of Xishuangbanna was subjected to districts being locked down and tourists prevented from leaving as 12 new cases of the Omicron BA 5.2 variant were reported. In Shanghai, Shenzhen, and other major cities testing protocols have ramped up as schools, entertainment venues, and tourist spots are closed. As of Monday, 36 Chinese cities were under various degrees of lockdown or control, affecting 196.9 million people.
At this point, it is thought that China will not effectively reopen to the rest of the world until Spring 2023 at the earliest. Some experts are suggesting an even later date. The challenge for the Chinese government lies in their efforts to balance their adherence to their Zero Covid policy against the negative economic impact that the policy is creating. The strategy has led to significantly weaker income growth and a sharp rise in youth unemployment, directly attacking China’s objective of achieving “common prosperity”.
Over the next three to six months, look for signs that China is preparing for a reopening: a renewed booster campaign, reshaping of public attitudes on the virus and ensuring adequate medical facilities and treatment methods.
On a positive note, Hong Kong has removed its mandatory hotel quarantine for international arrivals and instead has implemented a “0+3” policy. This means that while travelers into Hong Kong are still required to take a rapid antigen test, they are allowed to leave the airport pending their results, are no longer required to undergo three days of centralized hotel quarantine, and instead must engage in a three-day period of health monitoring during which they are not allowed to enter certain designated spaces such as restaurants or other public areas. This all bodes well for a resurgence in the Hong Kong economy and hopefully a hastening of China’s reopening.
So what does this all mean? Or on a more personal level, how does this affect my business? Well, first of all, one should not assume that when China finally relaxes its policies, it won’t be without disruption. Covid infections will certainly rise, and new shutdowns and restrictions will go back into place. Greater controls over inter and intra-country movement will undoubtedly occur. But once the country reopens to international travel, the general consensus is that this would be harder to reverse by the Chinese government even if Covid were to not be completely eradicated.
A more “open” China is an overall better partner to engage with than what businesses and governments around the world have had to deal with these past few years. One can expect to benefit from greater stability with material flow, manufacturing capacity (through presumably greater availability of workers), and improved freight forwarding timelines. One of the drivers of China’s ultimate decision to loosen its restrictions around its Zero Covid policy is to improve its economic recovery. And this author feels that a stronger economy in China will translate to a more advantageous business environment for our industry.