People's Bank of China

China’s economy is likely to grow by 3.7 percent this year, down from an earlier forecast of 4.3 percent due to the slow pace in lifting Covid restrictions, Fitch Ratings said. 

The ratings firm said it expects recovery to begin in 2H22 and for the economy to expand by 5.3 percent next year.

“There is considerable uncertainty over when the authorities will pivot away from the current dynamic zero Covid strategy,” Andrew Fennell, senior director and head of Greater China sovereigns, said in a note. “ In the absence of official guidance Fitch assumes the process will not begin until at least 2023 and proceed at a tentative pace.” 

China’s Covid levels are a fraction of what they were at their peak in April, however, the government is still struggling to gain control over the highly infectious Omicron variant. The government is carrying out mass testing of its citizens and has once again banned in-person dining in Shanghai.

The government has given no indication that it will back away from its policies, despite the impact on the economy.

The rolling lockdowns and testing restrictions are a significant impediment to travel. 

Mobility trends in China in April were at their lowest levels since the beginning of the pandemic, said Fitch, which says Beijing’s economic forecast for this year is unlikely to be met.

The firm was looking at traffic congestion, subway passenger volume and other high-frequency indicators.