Officials will likely take steps in the next three to six months to prepare for a reopening, Morgan Stanley said.
Morgan Stanley joined other major investment banks in predicting China will likely ease Covid restrictions and reopen the country by spring next year, providing a possible boost to the economy’s recovery, Bloomberg reports.
Pressure to reopen will build because the Covid Zero strategy has led to significantly weaker income growth and a sharp rise in youth unemployment – outcomes that are at odds with President Xi Jinping’s policy goal of “common prosperity,” according to Morgan Stanley. Reopening appears the remaining meaningful tool to manage the economy.
Goldman Sachs Group Inc. said last week China likely won’t begin reopening before the second quarter of next year, while Nomura Holding Inc. sees possible easing after March – once a reshuffle of China’s top leadership is completed. Both banks predicted a surge in infections once controls are lifted and a disruption to economic activity. They cut their 2023 growth outlooks to under 5%.