COVID-related controls are tightening in China once again, with several cities now facing partial lockdowns ahead of the 20th Party Congress. How China eventually ends its “zero COVID” policy is one of the most important questions for the trajectory of the economy over the next year. Continued uncertainty about lockdowns and other restrictions is depressing corporate investment, household consumption, and credit demand. A clearly announced end to COVID controls or a declared path forward following the 20th Party Congress would be far more constructive for the economic outlook. However, it is more likely that restrictions will simply fade away, as local officials reduce testing and reported case levels.
