In the midst of rising hopes for the end of Beijing's zero-Covid policy, Lombard Odier has formed a play-by-play forecast of mainland China’s reopening.

Beijing continues to persist with years of grueling Covid curbs that have had a significant socioeconomic impact on the world's second-largest economy. In addition to continuous calls by the business community for a reopening, mainland China’s public has also reportedly begun to express its discontent with the zero-Covid policy by staging protests in various cities. 

At Lombard Odier, it is forecasting a «meaningful reversal» of zero-Covid policies in the second half of 2023. 

«After early signs of these restrictions lifting in mid-November, we expect a gradual reopening to continue in 2023, providing a material fillip not just domestically, but to the broader global economy and trade,» Lombard Odier said in a report detailing its investment strategy for private clients.

Reopening Timeline

According to Lombard Odier, between the fourth quarter of 2022 and the third quarter of 2023, there are a number of likely events that will occur in a steady reopening. They include a change in the official narrative, greater vaccine and treatment efforts, healthcare system preparations as well as fiscal and monetary support.

And in the second and third quarter of next year, the Swiss bank also expects the end of mass testing, area-based lockdowns, domestic mobility restrictions and quarantine requirements for inbound travellers, though Covid deaths could rise.

«We expect more reopening guidance around the National People’s Congress in March 2023 and permanent reversals […] three to six months thereafter,» said Homin Lee, a macro strategist at Lombard Odier.

Growth Downgrade

As a result, Lombard Odier has downgraded its 2023 growth forecast for China to 4 percent alongside a target of 2 percent inflation. 

«This is a much better outcome than other key economies’ expected growth,» Lee added. «We note that Beijing retains complete discretion to quicken its reopening through vaccine approvals or boost business sector activities by reversing some of its regulatory crackdowns.»