China could keep its border restrictions for the rest of the year, as it prepares to host the Winter Olympics and a series of political events in 2022, Goldman Sachs Group Inc. said.
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Reports that Sinovac Biotech Ltd. made vaccines that are limited against the omicron variant will reinforce China's resolve to stick with its Covid Zero strategy, analysts led by Andrew Tilton wrote in a note Tuesday.
China is one of the few countries in the world that still adheres to the Covid Zero approach, while many others have shifted towards living with the disease. Strict measures to contain outbreaks - like the hard lockdown in Xi - have resulted in disruptions to production and travel and a slump in consumption, adding pressure on an economy already weighed down by a housing market slump.
The winter Olympics, which begins next month, the annual meeting of the national legislature in March and the 20th Communist Party Congress in the fourth quarter may be kept in place because of the quarantine requirements on travelers from abroad, according to Goldman. President Xi Jinping is expected to win a historic third term during the once-in-five-year party event.
As it warns of a triple whammy of contracting demand, supply shock and weakening expectations, Beijing has vowed this year to shift its policy focus to stabilizing economic growth from preventing risks.
The central bank boosted liquidity by cutting the amount of cash that must be held in reserve last month. The authorities have said they will meet what they call as reasonable demand for homes as they try to limit the fallout from a widening debt crisis that has engulfed the country s real estate industry.
Goldman believes that there will be a reduction in the reserve requirement ratio in the first quarter, with easing on credit and fiscal measures cushioning but not fully absorbing the downturn in the housing market.
The yuan could see a few more gains to 6.2 per dollar by the end of the year, as China maintains a meaningful current account surplus, according to analysts. They said that the Chinese currency would have solid net portfolio inflows, as well as a potential acceleration in equity purchases by foreigners with domestic stocks likely to perform better this year than last, as well as solid net portfolio inflows driven by index inclusions.
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