Officials are expected to respond swiftly to stem the social risk of escalating unrest, possibly via “piecemeal easing of restrictions”
Crowds gathered over the weekend in Shanghai, Beijing and other Chinese cities to protest against stringent COVID-19 measures disrupting lives three years into the pandemic.
Some made a show of civil disobedience unprecedented since leader Xi Jinping assumed power a decade ago, according to Reuters.
China’s zero-COVID policy has kept its official death toll in the thousands, but has come at the cost of confining many millions to long spells at home, bringing extensive disruption and damage to the world’s second-largest economy.
The current unrest is a major source of uncertainty for investors. The protests are being watched for any sign of political instability, something many of them had not considered in authoritarian China, where Xi recently secured a third leadership term.
Martin Petch, vice president at Moody’s Investors Service, said the ratings agency expected the protests “to dissipate relatively quickly and without resulting in serious political violence”.
“However, they have the potential to be credit negative if they are sustained and produce a more forceful response by the authorities.”
Oxford Economics anticipates China’s exit from its zero-Covid policy will only happen in H2 2023. “From an epidemiological and political perspective, we do not think the country is ready yet to open up,” it notes.
”Similar to the April 2022 outbreak, reports of public dissatisfaction across provinces in partial or full lockdowns have gained momentum, but they don’t yet reflect large-scale collective action.
“As before, we expect officials to be able to respond swiftly to stem the social risk of escalating protests, either through a combination of heavier-handed information controls or with piecemeal easing of restrictions.”
“In 2023, our outlook for China continues to be driven by the pace and timing of reopening efforts. This orderly exit from zero-Covid policy should lead to a pickup in domestic demand, consistent with what we’ve seen in the reopening experiences of several East Asian economies.”
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