China has eased 'zero-Covid' rules in what was seen as a first step toward reopening but cases are spreading as restrictions are loosened. Photo: Screengrab / BBC

Hong Kong stocks rose on Friday on China’s easing of its “zero-Covid” rules, including a shortening of the quarantine period for incoming travelers and new restrictions on local authorities from freely suspending schools and industrial production to curb outbreaks.

The Hang Seng Index surged 1,244 points, or 7.74%, to 17,325 on Friday. The index had fallen to 15,180, a 13-year low, on October 24 after the Chinese Communist Party’s (CCP) 20th National Congress concluded on October 22 without clear signs that Beijing planned to ease or end its strict Covid rules. The index fell further to 14,687 on October 31.

Today’s gains were led by Country Garden, which was up 34.9% to HK$2.24 (29 US cents), while Longfor Properties surged 29.1% to HK$18.2. Tech giant Alibaba closed up 12.4% to HK$70.8 while shopping platform Meituan increased 12.5% to HK$159.6.

The yuan strengthened and commodities from oil to iron ore and copper surged. Plane ticket bookings for flights into China doubled in the hour after the announcement, Bloomberg reported. 

The long-awaited relaxation of Covid rules was announced after the standing committee of the CCP Central Committee’s politburo held a meeting, chaired by general secretary Xi Jinping, on Thursday and unveiled a 20-point notice for officials to follow in easing the rules.

The so-called “7+3” arrangement – a week in hotel quarantine and three days at home for incoming travelers – will be reduced to “5+3.” During the quarantine period, an incoming traveler must still take and pass six PCR tests.

The same shortened quarantine length will be applied to close contacts of infected people in China, a contact-tracing regime that has seen millions thrown into government-run isolation facilities, wire reports said. Close contacts of close contacts will now no longer be identified, the reports said. 

A rule that required the suspension of a flight route for two weeks if 8% of its incoming passengers tested positive has been canceled under the new easing measures. Meanwhile, people who have been to “high-risk” Covid areas will only have to isolate themselves at home, instead of in a quarantine center, for seven days.

Beijing also urged local governments not to expand without limits the scale of their lockdown measures or freely suspend classes, production and transport.

Residents undergo nucleic acid tests for the Covid-19 coronavirus in Xiamen, in China’s eastern Fujian province on September 14, 2021. Photo: AFP / Stronger / China OUT

According to the easing notice, local governments should remain vigilant to any significant rebound in Covid cases and not think that they can now “lie flat,” or do nothing, to fight the Covid battle.

The new measures are aimed at making China’s Covid approach “more science-based and precise,” Chinese Foreign Ministry spokesman Zhao Lijian told reporters Friday in Beijing. “It does not mean that we have relaxed Covid containment or take a laid-back approach.”

“We believe that these measures will help improve the cross-border travels and make it more convenient for business people to visit China for investments and doing businesses,” Zhao said.

Significantly, the easing comes as Covid cases surge to a new six-month high, with outbreaks in Guangzhou and Beijing. Analysts quoted in reports said that means China’s reopening process will be cautious and prone to more lockdowns and restrictions if outbreaks spread in the winter cold season.

Even so, China’s foreign direct investment (FDI) rose 9.7% to US$16.9 billion from a year ago in September. In the first eight months of this year, China’s FDI is up 20.2% this year to US$138.4 billion.

China’s Covid cases rose from 8,824 on Wednesday to 10,535 on Thursday, said the National Health Commission. About 90% of the cases were asymptomatic, it said.

Guangdong reported 3,007 cases, 2,583 of which were identified in Guangzhou. Henan identified 3,005 cases, mainly due to a virus outbreak in a Foxconn factory in Zhengzhou. Beijing recorded 70 cases on Friday, up from 59 cases on Thursday.

Liu Xiaofeng, deputy director of the Beijing Center for Disease Control and Prevention, said Friday that virus outbreaks were identified in different locations in China’s capital, creating new risks of asymptomatic virus transmission.

Liu said Beijing would continue to suppress the epidemic via precise measures, such as encouraging people to meet online and eat meals at non-peak hours. He said people should avoid unnecessary gatherings and keep wearing masks, checking their body temperature and washing their hands regularly.

After the Hang Seng Index fell to its 13-year-low in late October, Chinese stock analysts and medical experts sent signals that Beijing planned to ease its Covid rules soon.

Hong Hao, managing director and head of research at BOCOM International, tweeted on November 1 that Beijing had already formed a “reopening committee” led by Wang Huning, a politburo standing committee member. Hong said China might ease its quarantine rules in March, after the winter cold season and Chinese New Year holiday.

Covid lockdowns have taken a heavy toll on China’s economy and society. Image: Screengrab / HBO

On November 4, Zeng Guang, a former chief epidemiologist at the Chinese Center for Disease Control and Prevention, said substantial changes to China’s zero-Covid policy would soon be implemented. The Hang Seng Index has rebounded by 18% so far this month.

However, some medical experts warned that it was not yet time for China to fully resume quarantine-free travel given that most of China’s population has not been inoculated with Western-made mRNA vaccines, which have proven far superior to its indigenous Sinovac and Sinopharm shots. 

More than 80% of Taiwan’s 24 million people have been fully inoculated with three doses of Western vaccines. Still, the self-governing island has recorded more than 20,000 cases and about 50-60 deaths per day. The deceased were either not fully vaccinated or had underlying chronic diseases, reports have said. 

Read: To zero-Covid or not to zero-Covid in China

Follow Jeff Pao on Twitter at @jeffpao3