China cuts Covid quarantine rules while Guangzhou nears lockdown

China has eased coronavirus quarantine requirements for close contacts and international travellers, in the first marginal relaxation of Xi Jinping’s zero-Covid strategy since the policy was reaffirmed at the Communist party congress last month.

The State Council, China’s cabinet, pared the mandatory quarantine for close contacts of positive Covid-19 cases and overseas arrivals from seven days to five, while maintaining three further days of home isolation.

In practice, both quarantine procedures, which are carried out in centralised government facilities, have often been enforced for longer than the mandated periods. The latest changes also included ending the tracing of second-degree close contacts of confirmed positive cases.

China has remained an international outlier on pandemic restrictions, persevering with Xi’s zero-Covid playbook of locking down buildings, suburbs, or entire cities as well as mass testing, quarantine and electronic contact tracing.

Speculation has surged in recent weeks that Beijing was considering a more significant relaxation of the zero-Covid policy, despite Xi’s administration consistently signalling that it would prioritise protecting the country’s 1.4bn people over the damage wrought by the measures on the world’s second-biggest economy.

China reported more than 10,000 new Covid cases on Friday, the highest daily tally since late April, when Shanghai was in the throes of a heavy-handed two-month lockdown.

Guangzhou, the capital of the southern manufacturing hub Guangdong, is now teetering on the brink of a citywide lockdown, with millions of residents subject to mass testing and home isolation in an effort to curb a worsening outbreak. The city of almost 19mn people reported 2,824 new local cases for Thursday.

The latest policy tweaks came after the party’s seven-member Politburo Standing Committee, led by Xi, met on Thursday and reaffirmed the zero-Covid strategy while promising to optimise its implementation.

“The meeting underscored putting the people and their lives above all else, preventing both imported cases and domestic resurgences, and tenaciously pursuing the dynamic zero-Covid policy,” state media reported.

Bruce Pang, chief economist for greater China at JLL, warned against a “too optimistic” reading of Beijing’s easing.

“China’s Covid policy will only be fine-tuned in the short term, with the focus shifting between eliminating cases and making more precise measures,” he said, adding that China’s leaders had reiterated that the policy changes should not be “misread” as a reopening.

The newly announced measures also called for an escalation of China’s vaccination campaign, particularly among the elderly, who have been the most hesitant to accept Covid jabs. Experts said increasing the vaccination rate of seniors was essential to any eventual reopening.

In late June, Chinese authorities halved the quarantine requirement for international arrivals from two weeks to one, and reduced the home self-isolation period from seven days to three, in what was then the first significant relaxation of restrictions since the lockdowns in Shanghai and Beijing.

China-focused equities were buoyed by the announcement on Friday, with the CSI 300 index of Shanghai- and Shenzhen-listed stocks closing up 2.8 per cent, having traded as much as 3.8 per cent higher following the announcement.

In Hong Kong, the Hang Seng China Enterprises index, which tracks mainland companies listed in the city, rose 8.3 per cent on Friday, having been up 5.5 per cent earlier in the day in the wake of Wall Street’s best one-day gain in two years.