Chinese shares have rallied on signs President Xi Jinping is embracing pragmatism and easing up on crackdowns. However, Beijing might also be losing control of the virus. Policy relaxations may be moot, says petesweeneypro
of New York-listed Chinese companies is up 37% since late October. Yet biology could ruin this party yet.
Most of China’s trading partners have moved on to living with the virus, but Xi still aspires to keep it out. Unfortunately, highly contagious new strains took advantage of the travel surge during the October national holiday week to go on a tour around the country. Surveys by consultancy Dragonomics logged over 200 cities per day reporting outbreaks in November, more than double the number seen during the traumatic lockdown in Shanghai in April.
Unless infections get tied down quickly with existing methods, there are three ugly scenarios worth considering. In the first, Beijing quarantines even more tightly. In the second, Covid-19 finally runs wild in China, killing the unvaccinated elderly as it did in Hong Kong earlier this year.
Economically, any of these scenarios could re-enact the first quarter of 2020, when GDP contracted 6.8%, wreck any relief rally and further squeeze earnings at consumer-facing companies like Alibaba
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