A bang or a whimper? Chinese consumers face first restriction-free Lunar New Year since start of pandemic

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Days into the first Lunar New Year without movement restrictions since the start of the pandemic, Chinese consumers say they are eager to spend and travel, but remain wary as a mammoth COVID-19 wave sweeps through the country.

The 15-day festival has long been called the world’s largest migration, in which students and workers return to their hometowns in droves — that is, until COVID hit in 2019.

In the years that followed, movement and spending were hampered by the government’s harsh zero-COVID policy, which relied on lockdowns and mass testing to quash even the tiniest of outbreaks.

Those restrictions were suddenly ended in early December, allowing an omicron wave to gush into a country that had essentially no natural immunity to the virus.

Officials said Saturday that as much as 80% of the population — or roughly 1.2 billion people — has been infected since then.

Besides that estimate, the government has either not issued COVID statistics or published data that was widely criticized by experts, including the suspiciously low official death toll of 73,000. The lack of information has left citizens to do their own risk calculations.

“Everyone in my family has been infected since December. But we are already worried about getting it a second time,” said Yang Yilin, a graduate student in the western metropolis of Chengdu.

Her concerns were mirrored, in some form, by nearly a dozen other citizens across the country who MarketWatch spoke to.

“Before the pandemic, we would get together with all of the extended family several times during the break. This year we only have plans for one small dinner,” said Wang Mingfeng, a 31-year-old Beijing resident.

Other factors respondents cited limiting their spending or movement included a tightened pocketbook due to pandemic-induced unemployment, the need to protect elderly relatives with weakened immune systems, and fears of increased risk of “long COVID” symptoms with reinfection.

But all said they were eager to resume normal activity and were confident things would improve.

Analysts agreed, as the COVID wave subsides and expectations of government support increase.

“By the second quarter of this year, [a] return to pragmatism should result in a domestic demand-driven economic recovery, fueled in part by a drawdown of the massive accumulation of household bank deposits since the start of the pandemic,” said Matthews Asia investment strategist Andy Rothman.

“With Beijing likely to remain the only major government engaged in serious easing of fiscal and monetary policy — while much of the world is tightening — China may once again be the engine of global economic growth,” he said in an emailed statement.

After two years of stimulus measures that seem restrained compared to those issued in the U.S. and Europe, Chinese policy makers appear set on stoking a rebound in 2023.

Last month, the deputy governor of China’s central bank, Liu Guoqiang, told a forum in Beijing, “The magnitude of monetary policy will not be smaller than that of 2022, and can be expanded when needed, unless economic growth and inflation exceed expectations.”

Days later, the housing minister pledged targeted support for the country’s beleaguered property sector.

Then last week, China’s cabinet rolled out 15 measures aimed at boosting small and medium enterprises, by easing financing and strengthening rules such as intellectual property protections.

“We expect strong growth in retail sales of essential goods, such as food and beverages, despite a high base in 2022 from consumers stocking up for fear of lock-downs,” analysts at Fitch Ratings wrote in a note published Thursday.

Non-essential goods should recover later in the year, as consumer sentiment improves, boosting products such as apparel and cosmetics, the authors said.

But they warned that the economy would take time to mend.

“The recovery in China’s consumption after the lifting of COVID-19 restrictions is likely to be bumpier than those in many other major economies due to the weak employment and income outlook, decreasing home prices, rising household leverage and a lack of direct stimulus.”

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