Fine-tuned anti-virus measures expected to boost economic activity

More precise COVID-19 containment is expected to buffer the downward pressures on the Chinese economy by minimizing disruptions to economic activity while avoiding large-scale waves of infection, economists said on Monday.

They noted, however, the risk that this effect could be offset by the current rise in infections, and they called for fast and effective implementation of the adjusted COVID-19 control measures and greater macro policy support to stabilize growth.

China rolled out 20 measures to optimize nationwide COVID-19 containment on Friday after the recent rise in COVID-19 cases posed headwinds to economic recovery, which might be seen in October's key economic figures, to be released on Tuesday.

The new measures, shortening the quarantine period and minimizing the number of people whose movement is restricted, are expected to help lift China's economic growth by increasing the continuity of economic activity, they said.

"The optimized COVID-19 control is definitely a big positive to economic recovery for the coming six to 12 months," said Jacqueline Rong, deputy chief China economist at BNP Paribas.

While local governments may retain some policy flexibility, based on local COVID-19 situations, they are expected to generally move toward a more precise and scientific approach, striking a better balance between pandemic control and economic development, Rong said.

Reflecting global investors' heightened confidence in China's economic growth from the new measures, the onshore renminbi strengthened against the dollar for the second straight trading session on Monday, rising to about 7.03 on Monday afternoon, the strongest level since late September.

Luo Zhiheng, chief economist at Yuekai Securities, said optimized COVID-19 containment measures can help drive growth in the fourth quarter by expanding consumption scenarios, improving industrial chain stability and stabilizing business operation and employment.

Such driving force is critical at a time when economic downward pressures remain heavy due to a rise in COVID-19 cases, slowing exports and the lingering weakness of the real estate sector, Luo said.

Su Jian, a professor at Peking University's School of Economics, stressed the need to ensure that the optimized COVID-19 control is well implemented at the local level to safeguard continuity of economic activity.

However, Rong at BNP Paribas said the short-term effects of the optimized control may still be eroded by the current uptrend in new infections, which could still necessitate the rollout of restrictions and make consumers cautious about buying offline.

It is therefore still urgent for fiscal and monetary policy to further beef up support for domestic demand to stabilize economic growth together with the fine-tuning of COVID-19 control, experts added.

The People's Bank of China, the country's central bank, issued a circular on Monday that encourages banks to arrange repayment deferral for loans to small and micro businesses that mature in the fourth quarter to shore up small businesses and the real economy.