Rebound of the Covid epidemic in China: the country is torn between relaxation and severe confinement

The number of new COVID-19 cases has risen in Guangzhou and other Chinese cities, official data showed on Tuesday, making the manufacturing city the new epicenter of China’s outbreak.

Nationwide, new infections reached 7,475 cases on November 7, according to Chinese health authorities, up from 5,496 the day before, the highest number since May 1. With 2,377 local cases reported, Guangzhou accounted for almost a third of new infections, surpassing Hohhot in Inner Mongolia, raising fears of a severe lockdown, as was the case in Shanghai.

Zero Covid Policy

The increase in the number of cases in the country is modest by world standards, but significant for China, which observes a “zero COVID” policy. This sudden spike will test the country’s ability to maintain its targeted health measures and could disappoint investors hoping for a lifting of restrictions. “We are witnessing a game between the voices that are raised for a relaxation of controls and the rapid spread of COVID”said Nie Wen, an economist at Hwabao Trust in Shanghai.

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Taking into account how health restrictions are affecting domestic consumption, Nie Wen lowered his fourth-quarter economic growth forecast from 4-4.5 percent to around 3.5 percent. Economic growth was 3.9% between July and September.

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The rise in the number of cases weighed on Chinese markets on Tuesday, without erasing the strong gains of last week. Investors are watching with interest as Chinese markets tumble amid the threat of a new lockdown, focusing on small signs of gradual change, such as more targeted lockdowns and rising vaccination rates. “Despite how harsh the letter of the law is… there is a little more relaxation”said Damien Boey, chief macro strategist at Australian investment bank Barrenjoey.

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