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People line up outside a fever clinic in Beijing on December 14, 2022, days after the country relaxed its Covid controls amid sub-freezing weather in the capital.

Yuxuan Zhang |: Afp |: Getty Images:

BEIJING – Mainland China’s rapid easing of many Covid-related restrictions has been unexpectedly sudden, exposing a new set of economic challenges.

In the past two weeks, local and central government authorities have relaxed several measures that have forced many people to stay at home and businesses to operate mostly remotely. Notably, the central government said last week that negative virus tests and health code checks are no longer required for domestic travel.

Meanwhile, reports of local residents falling ill have increased. The city of Beijing reported 22,000 visits to its fever clinics on Sunday, 16 times more than a week earlier.

“This reopening was quite sudden and quite decisive. It exceeded our expectations,” said Gang Yu, co-founder and executive chairman. 111:, an online seller of medicines and health services. That’s according to CNBC’s Mandarin translation of his comments.

Shortage of staff and drugs

Orders for antipyretics and related drugs have increased tenfold since late November, Yu said in a phone interview Thursday. He said there was an “extraordinary shortage” of the drug that factories could not keep up with, a situation he expected to last at least another three or four weeks.

In addition to high demand, dozens of workers at 111 warehouses or offices in various parts of China have tested positive for Covid, creating an “extraordinary shortage” of staff, Yu said.

This is a different challenge from earlier this year, when widespread Covid lockdowns meant thousands of new orders were being blocked at various distribution points every day, Yu said.

Shipping is still slower than normal in some parts of the country.

Even as of Sunday, the China Post Agency said more than 400 distribution points in Beijing and other parts of the country remained closed for Covid-related reasons.

In terms of scale, the Postal Service said Tuesday it collects more than 360 million packages a day, which is more than one package per person in the United States.

We believe that the migration coming around the Chinese New Year holiday at the end of January could lead to an unprecedented spread of Covid and serious disruptions to the economy.

JD.com announced on Wednesday that more than 1,000 couriers from other parts of the country had arrived in the capital, Beijing. Anecdotally, over the past few days, app-based food and grocery services in Beijing that normally deliver within an hour were only doing so at much longer intervals or the next day.

Increasing infections can compensate for the weakening

“Over the past two weeks, the Chinese government has made a sudden 180-degree U-turn, ending its zero-Covid policy, with most domestic prevention measures completely withdrawn,” Nomura chief China economist Ting Lu and team said on Thursday.

“A rise in Covid infections could offset the positive impact of easing in the near term.”

“The rapid increase in infections in major cities could be just the beginning of a massive wave of Covid infections,” analysts said.

“We expect key activity indicators to remain weak or even decline further in December. We believe that inbound migration around the Chinese New Year holiday in late January could lead to an unprecedented spread of Covid and serious disruption to the economy.”

China on Thursday reported a worse-than-expected drop in retail sales in November, as well as slower growth in industrial production and fixed investment.

Get through the winter first

Public activity remains subdued amid rising infections and sub-freezing weather in northern cities. Traffic data from Baidu showed that in major cities such as Beijing and Guangzhou, most people did not leave and congestion levels were still very low as of Thursday.

Management at Chinese travel booking site Trip.com was also reserved about how soon domestic travel would resume.

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“We actually saw very strong sequential growth in domestic flights and hotel bookings over the past two weeks,” they said on Thursday, according to a transcript of the FactSet earnings call.

“But in the very near term, we remain cautious as winter is typically a flat season for both business and leisure travel,” they said.

“And it may also take some time for people to get over the first wave of infections before travel demand fully releases and returns. But we expect to see a very good recovery and growth in the domestic travel segment next year.”

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