This year has been a disappointing year for China growth and markets. After two years of relative success in keeping Covid at bay, the emergence of the much more transmissible Omicron variant significantly challenged China’s zero-Covid policy. The two-month strict lockdown in Shanghai during April-May led to severe disruptions in both industrial and services activity, resulting in a 10.4 per cent quarter-on-quarter annualised contraction in real GDP growth in the second quarter of this year. Despite the government’s efforts to frontload and expand fiscal spending, with Covid cases rising again in multiple major cities in the current quarter, real GDP growth is on track for a meager 3.0 per cent year-on-year increase in 2022, significantly lower than the “around 5.5 per cent” growth target set at the beginning of the year. During the first 10 months of 2022, Chinese equity prices fell almost 30 per cent and the Renminbi depreciated 15 per cent against the US dollar. Recent news on China’s Covid policy has been more encouraging. Over the past two weeks, unprecedented protests have erupted in many cities across the country. Although the authorities were swift to react to prevent...
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