China shifts from zero-Covid towards reopening

Today’s top stories

• Nato chief Jens Stoltenberg said conditions for peace in Ukraine were “not there now” as he urged the west to continue supplying Kyiv with weapons over the winter. Martin Wolf puts the economic case for support, arguing that backing Kyiv will be less expensive in the long run than allowing Putin to prevail.

• German police arrested 25 alleged rightwing radicals suspected of planning to overthrow the state in a violent coup, in a plot with echoes of QAnon-style conspiracy theories.

• Eurozone third-quarter growth was revised up to 0.3 per cent, lifted by rising investment and consumer spending. The better than expected numbers add to signs that a likely winter downturn may be less severe than first feared.

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Good evening.

The announcement of wide-ranging relaxations of strict pandemic controls is the biggest sign yet that China is shifting its focus from battling Covid-19 to stabilising the economy.

The new measures allow those with mild infections to quarantine at home rather than be taken to special facilities (as our reporter Thomas Hale can attest) and dispense with the need, already in practice in some cities, for proof of a negative test before entering public places.

The news came on the same day new trade data showed China’s exports and imports both shrank by their biggest margins in several years in November. The figures added to investors’ concerns of a slowdown in global growth, sending oil prices down as well as Chinese stocks. High youth unemployment was also one of the driving factors in the recent unrest in several Chinese cities.

The watering down of the zero-Covid regime is not without risks: new modelling suggests 1mn Chinese are at risk of dying from the disease this winter once controls are lifted. A possible winter wave also threatens to overwhelm the country’s healthcare system, while the lunar new year holiday, the world’s largest annual human migration (which begins on January 21) could become a superspreader event.

Authorities also need to address the fact that tens of millions of elderly Chinese have refused a vaccine. Nearly 90mn people are insufficiently protected, a problem made worse by Beijing’s refusal to deploy more effective RNA-based western shots.

The change in policy is also personally significant for Chinese leader Xi Jinping, who has identified himself closely with zero-Covid, warning previously that Covid was a “devil virus” that only an “all-out people’s war” could vanquish.

Asia business editor Leo Lewis turns to what China’s eventual reopening might mean for global markets. Chinese and emerging market equities have the biggest potential to rise, as do copper and oil prices and currencies such as the Australian dollar. But there could be downsides, too, as speedy Chinese growth revives supply constraints and feeds inflationary pressures.

One thing is for certain, says Lewis: markets always crave a good narrative — and this one is set to be the defining story of the impending new year.

Need to know: UK and Europe economy

UK house prices fell 2.3 per cent in November, the fastest pace of decline since the 2008 financial crisis, according to mortgage provider Halifax. Construction growth also slowed more than expected.

New data from the British Retail Consortium showed consumers were tightening their belts ahead of the festive period. A typical UK Christmas dinner will cost almost 10 per cent more this year compared with last year.

In darker downturn news, an FT investigation has found more women in the UK are not only turning to sex work to make ends meet but also taking greater risks.

Germany, France and the Netherlands were among EU states urging Brussels to amend sanctions on Russian food exports, which they said were delaying shipments to poor countries. Meanwhile, new evidence is emerging that Russia is getting adept at blunting western oil restrictions.

There could be new EU sanctions on Russia’s mining industry, the first time Brussels has directly targeted the metals sector, which it has previously avoided because of the impact on global supply chains. Russia is a major producer of commodities such as gold, iron ore, uranium and phosphates.

German companies have been racing to adjust to the loss of Russian gas by dimming lights, switching to oil and even thinking about moving abroad where energy is cheaper. Our Big Read examines the country’s broken business model. It’s not just Germany: the whole of Europe needs a new industrial master plan, says Fatih Birol of the International Energy Agency.

Need to know: Global economy

The World Bank warned of the mounting debt burden on poorer countries for the next three years as they struggle against higher interest rates, a stronger dollar and a large number of bond maturities, as well as having to restart payments deferred during the pandemic.

Australia and New Zealand are both in a tight spot but are taking radically different paths to fighting inflation. While the former is looking for a “soft landing” where its economy can be protected, the latter has adopted an ultra-hawkish stance to bring prices down at any cost. New data today showed the Australian rebound slowing.

The latest manifestation of the serious economic crisis in Lebanon is an outbreak of cholera. The collapse of the country’s electricity sector and rising prices of fuel exports mean the government can no longer run water pumping and sewage treatment plants.

Malawian police detained the head of the southern African nation’s anti-corruption bureau, days after her office charged the vice-president with taking bribes from a British businessman. The arrest has underlined the scale of the political crisis hitting one of the world’s poorest countries.

Need to know: business

The US said Beijing had relented and allowed inspections of Chinese companies to police tough semiconductor export controls. An account of the global chip wars has won the FT Business Book of the Year Award.

Global airlines will return to profit next year for the first time since 2019, according to new industry forecasts. The International Air Transport Association expects airlines to report a net profit of $4.7bn after racking up more than $185bn of losses during the previous three years of limited flying.

US supply chain pressures are easing as the problems of backed-up ports, truck driver shortages and lack of warehouse space start to fade. Shipping demand is also going down because of lower consumer spending and shrinking manufacturing activity.

As the motor industry shifts to electric vehicles, China is turning itself into the battery workshop of the world. By 2031 it is projected to have more production capacity in Europe, the second biggest market for EVs, than any other country. Battery prices have risen for the first time in more than a decade.

The World of Work

Our mini-podcast series on four days’ work for five days’ pay continues. Today we hear what the experts say, while you should listen to tomorrow’s episode to find out if the companies taking part in the four-day week trial stick with it.

Get the latest worldwide picture with our vaccine tracker

Some good news

One million extra years of history has been unlocked by the discovery of the world’s oldest DNA in Greenland. The 2mn-years old material (beating the previous 1mn-year old sample from the tooth of a mammoth) offers scientists new clues as to how ecosystems adjust to climate change.