The most significant question for the Chinese economy and Chinese outbound property investment is around when the country will relax its Zero-COVID restrictions and reopen its borders. 

China is the largest trading partner for 128 countries, making the Chinese economy a crucial hub of global economic activity. So, the question of China’s reopening matters within China itself and all over the globe.

Today, travellers face several requirements in returning to China. They must take Covid tests before and after their flights, isolate for seven days in a designated quarantine facility and three additional days at home, and buy tickets at exceptionally high prices on a minimal number of available flights. 

The requirements are sometimes shifting and not always clear. For example, some airlines require passengers to undertake five days of quarantine even before embarking.

What Is Zero-Covid?

These restrictions on international travel are an essential element of China’s dynamic zero-COVID strategy. Zero-COVID’s goal is to eliminate outbreaks and keep case numbers as close to zero as possible through mass testing and enforced lockdowns.

Zero-COVID has been overwhelmingly effective when measured by case numbers and fatalities. Zero-COVID has kept Chinese excess deaths remarkably low, in stark contrast to many developed countries. 

The USA has suffered more than one million fatalities and 96 million cases. By contrast, China has reported fewer than one million cases and a mere 5,226 deaths. Even if these figures are an undercount, it suggests the actual numbers are a fraction of U.S. losses and extremely low for a population of 1.4 billion – four times that of the USA.

When Will Borders Reopen?

Morgan Stanley Research analysts expect China to broadly reopen in the second half of 2022 and move away from the Zero-COVID policy by the end of this year.

At Juwai IQI, we believe China will maintain zero-Covid through at least the first-quarter of 2023. Even if China begins opening sooner, we forecast China will not fully reopen until at least Q3 2023. That is because Beijing has expressed its commitment to the Zero-COVID strategy in both word and deed.

Here is a fuller explanation of our conclusion that China is unlikely to reopen sooner:

• The Zero-COVID strategy has been enacted at great public expense and repeatedly endorsed at the highest levels of the Chinese government. China’s Zero-COVID policy infrastructure is a network of testing centres placed within a 15-minute walk for residents of the largest cities. The system can test 1.4 billion individuals every six days, equivalent to China’s entire population.
• Cases spread rapidly during recent outbreaks in Tibet and Sichuan, revealing that relaxing Zero-COVID can lead to rapidly increasing caseloads.
• The impact of Covid can be worse during winter, according to UN Secretary-General Antonio Guterres, making it more unlikely that Zero-COVID will be relaxed before Q2 2023 at least. The risk of a winter infection surge is high in China, with low vaccination rates among the elderly and no herd immunity.
• Unless China finds other methods to keep the rates of Covid infection and deaths low, Beijing will carefully consider any proposals to unwind the Zero-COVID strategy.

Thus, we believe JP Morgan’s forecast is too optimistic. More realistic is the forecast from Nomura, which expects Beijing to begin relaxing Zero-COVID from March 2022, although Nomura says it is too soon to know how fast Beijing will move at that point. Nomura points out China’s leaders will need to balance the opening with possibly rising case numbers.

In the meantime, the best hope for a more rapid off-ramp from Zero-COVID comes from innovations such as the inhalable Covid vaccine Convidecia. Beijing recently approved Convidecia, which reportedly has 58% efficacy against symptomatic disease and 92% against severe COVID-19.

By Juwai IQI Co-Founder and Group CEO Kashif Ansari.