Despite continued virus confusion, the Dynamic Zero policy is obviously gone and the Chinese leadership would appear to be aiming at herd immunity. Testing for the virus has largely stopped, and official statistics have become meaningless. Anecdotally it would appear that in Beijing, and in some other places, the infection rate may have topped 50%, while in other places, it may be 20% … but who knows? It is all guesswork. And that is the way they would like to leave it. The goal, presumably, is to have China pretty much open economically by March, and the word is that travel between Hong Kong and the mainland will be freed up from January 9, with only a three day homestay required for China arrivals from Hong Kong.
The official economic numbers for November were released and they were more awful than expected, with consumer spending in particular down substantially. The overall policy response, based upon announcements, continues to stress supply-side support, but economists generally seem to take the view that the only answer to this is to stimulate consumer spending—massively. But how to instill Chinese consumers with confidence in the current climate? And how to convince private companies to invest? The answer is this is going to be really difficult. And 2023 is going to be a tough year. The underlying problems are mostly systemic, and getting local governments to spend more on infrastructure is not going to solve the problem, it just digs the hole a little bit deeper. Solving the problems will involve all sorts of systemic pain, but delaying the process surely just makes the pain even greater further down the road?
In other news, the United States tightened the screws a little further by adding extra Chinese companies and individuals to its naughty list, including the semiconductor manufacturer YMTC. But audits of Chinese companies listed in the US, previously verboten, seem to be going better than expected.
The great story continues to unfold. Have a good weekend.
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