China may signal policy shift to economy from Covid Zero

China’s top leaders will likely signal a more pragmatic approach toward Covid controls at a key upcoming meeting while putting more focus on boosting economic growth, economists say.

The 24-member Politburo, the Communist Party’s top decisionmaking body, usually convenes in early December every year to set broad guidelines for economic policy for the coming year. The plans are then fleshed out at the Central Economic Work Conference, which often follows within a week of the Politburo meeting. Policy objectives, including a target for gross domestic product, are then published in March at the annual legislative meeting.

Top of mind for investors is how officials will balance the Covid Zero strategy against the need for economic growth. With Beijing now signalling a decisive shift away from its zero-tolerance approach to combating Covid infections, economists say China desperately needs more monetary and fiscal stimulus to support the recovery into next year.


It’s only the second time the new Politburo is meeting -- and the first one that will be focused on the economy -- since President Xi Jinping secured a precedent-breaking third term in power in October.

COVID PRAGMATISM
The Politburo will likely adopt language that signals a more targeted approach toward combating Covid infections, in line with the government’s recent steps to reduce the impact of virus curbs on economic activity and the lives of people. Officials have started preparing the population for more outbreaks and a potential exit from Covid Zero. Beijing city, for example, will allow some infected people to isolate at home, Bloomberg News reported. Manufacturing hub Guangzhou replaced lockdowns in some districts with more targeted restrictions.

Markets will be zooming in on any changes in the Politburo's statement regarding the Covid strategy. Since April, the Politburo's language has been consistent in highlighting three objectives of “putting the people and their lives first, preventing imported cases and a domestic rebound, and dynamic Covid Zero.”

Sun Chunlan, the outgoing vice premier who has steered China’s Covid policy, dropped reference to those three goals in a speech this week, a further sign the government was slowly shifting its stance on virus controls.