Will China alter its zero-COVID stance in response to growing discontent? That’s the hot question on traders minds, as protests and accompanying crackdowns take place on the streets of Beijing, Shanghai and elsewhere. It will be a delicate balancing act for Xi Jinping to pivot away from the draconian policy, but in some ways he already has, like the recently announced “20 measures” that cut quarantine periods for close contacts of COVID cases and inbound travelers.
Policy watch: Today’s meeting of the Chinese State Council took on extra importance, as the weekly press conference signaled that further changes to current measures might be in the making. “China has been following and is closely watching the virus as it evolves and mutates,” officials said during the briefing, while health authorities released a plan to boost elderly vaccination. China also reported a decline in new COVID-19 infections with 38,645 cases after a record daily high of 40,347 on Sunday.
Markets loved any sign of easing COVID-zero following some nervousness seen in the prior session. The Shanghai Composite closed 2.3% higher, while stocks in Hong Kong rocketed 5.4% and the Hang Seng TECH Index even finished the day up 7.7%. Chinese vaccine developers were also big winners, with shares of CanSino Biologics (OTCPK:CASBF) soaring as much as 18% in Hong Kong.
Why are the protests happening now? Xi Jinping has been at the helm for nearly a decade, but over most of that period, the benefits of a booming economy were widely felt across China. Things have slowed sharply due to zero-COVID policies, and many workers are now finding it difficult to make a living amid severe restrictions and lockdowns. The current measures are also unpredictable and being seen as irrational, especially as the Chinese watch a maskless World Cup and compare it to the strict protocols of the 2022 Beijing Winter Games.
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