I fear China has painted itself into a corner with its own narrative and that it will find it hard to spin its way out of it in the short run.
The West "laid" flat vis a vis Covid and, therefore, allowed its citizens to suffer whereas China can control Covid and, thereby, protects its citizens better ergo China is a successful state whereas the West is not - this has been the message for a long time. Doing a volte face on that will not be easy. The refusal to adopt non-domestic vaccines seems also to have been an error. So messaging, politics and policy trump pragmatic decision making. Resulting in widespread & unnecessary social and economic stresses. I understand the law of large numbers at play here ie even a tiny %age mortality rate of 1.4bn is a huge number (but see my point re non-domestic vaccines that could have mitigated that) - even so what we are seeing now are very draconian measures almost certainly doomed to fail getting China & its citizens the worst of both worlds sadly
However, this cannot and will not last forever. Public discontent is at an all time recent high and the socio-economic damage is real, deep and potentially long-lasting. This week we have seen commitments from the government on two matters:
The economic growth targets will be met for 2022
Dynamic Zero Covid will continue to be utilised to contain the spread of the virus
What to make of these potentially contradictory, mutually exclusive decisions?
Firstly, expect economic stimuli to boost the domestic economy. Perhaps we will see HK style consumption vouchers, tax breaks and the like in the back half of the year.
Secondly, there will be a governmental spending spree - infrastructure will likely be a focus.
Thirdly, we may see a relaxation of some of the regulatory changes that have dampened sentiment and investment.
What we should not expect any time soon is a backing away from travel restrictions. I would expect a phased and cautious reopening over the next 6-12 months. Visas will start being issued but quarantine will persist for incoming travellers. Submitting to that quarantine (and the broader Covid19 healthcare system of isolation centres etc if a traveler tests positive) will likely mean most will still not travel to China and so the borders will remain de-facto closed for most for a while to come.
Long-lasting damage has been done to China's reputation both as a place to invest and to live. But, over time, the attractions of the market will trump these concerns and sentiment will improve and expats and investors will return.
To a large degree, China has shot itself in its foot with its recent policies from an economic perspective but they will not allow this to become a permanent state of affairs. "Common prosperity for all" is key to China's story and too important to let wither on the vine for too long.