Shanghai sets out plans for end of a painful Covid-19 lockdown

There are reports that Shanghai adds no new covid cases outside quarantine for the third day which is underpinning risk appetite. However, Shanghai had already set out plans for the return of more normal life from 1 June and the end of a painful Covid-19 lockdown that has lasted more than six weeks and contributed to a sharp slowdown in China’s economic activity.

In the clearest timetable yet, deputy mayor Zong Ming said at the start of the week that Shanghai’s reopening would be carried out in stages, with movement curbs largely to remain in place until 21 May to prevent a rebound in infections, before a gradual easing.

“From June 1 to mid-and late June, as long as risks of a rebound in infections are controlled, we will fully implement epidemic prevention and control, normalise management and fully restore normal production and life in the city,” she said.

Economic data was released at the start of the week also that had shown China’s industrial output fell 2.9% in April from a year earlier. This was down sharply from a 5.0% increase in March, while Retail Sales shrank 11.1% year-on-year after falling 3.5% the month before.

Both were well below expectations and initially weighed heavily on the yuan and antipodeans. 

However, there has been a recovery in risk appetite as analysts note that economic activity has probably been improving somewhat in May. Additionally, the government and the PBoC are expected to deploy more stimulus measures to speed things up.

“China’s economy could see a more meaningful recovery in the second half, barring a Shanghai-like lockdown in another major city,” said Tommy Wu, the lead China economist at Oxford Economics.

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