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Consensus Sees Broader COVID Strategy Shift in Mar'23 (2/2)

CHINA
  • Goldman Sachs see the government as still needing to keep its zero-Covid policy until all preparations are done. This may take a few months, and they continue to expect 2023Q2 reopening as the baseline.
  • With the government preparation beginning, increased pricing-in of China reopening in a forward-looking market may be warranted. However, it is worth emphasizing that we are still at least a few months away from the actual reopening. For this reason, they expect GDP growth to be soft in Q4 (3.5% qoq ann) and think the reopening boost to growth may not materialize until H2 next year.
  • TD Securities continue to see only a gradual easing of zero-Covid restrictions domestically, suggesting that markets could be in for some disappointment if more rapid easing is expected. They write that if zero-Covid were to be dismantled in Q1 next year, China's growth could move back to around 6-6.5%, rather than the 4.7% they currently assume.
  • Should China open up symmetrically it would once again put pressure on the services balance of China's current account, leading to more and not less pressure on the CNY. Rising Covid cases across the country, suggest that consumer caution would persist for a while longer. Given that the economy is struggling under the weight of a highly pressured property sector, it is highly unlikely that the world is about to see a positive demand shock emanating from China.
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