As new COVID variants have proved to be milder and vaccines have become more widespread, the rest of the world has moved on from strict policies. China has stuck to the same heavy-handed approach, concerned that a large number of deaths could come with a policy change, and reluctant to import more potent foreign vaccines.

With each new outbreak and infectious strain of COVID-19, the uncertainty grows over how and when Xi will dismantle his pandemic policy.

“China has this boot on the neck of economic activity, and we’re past the point where the boot made sense,” said Jude Blanchette, an expert on China at the Centre for Strategic and International Studies. “The problem is, the most authoritative voice continues to reiterate no change.”

Easing COVID policy matters for the economy. People are staying home, fearful that they might cross paths with someone infected and be sent to a long quarantine under heavy guard. China continues to isolate not just those sick with COVID but anyone who has come in contact with them. Many stores and eateries have closed.

The world’s largest iPhone manufacturing complex in the north-central Chinese city of Zhengzhou went into a lockdown in mid-October and again this month. Some employees fled the 200,000-worker facility with stories of food shortages flooding the internet. Apple this week warned that its sales would be short of expectations because of the drastic measures.

The warning, and China’s latest COVID situation, was described by one analyst as “an absolute gut punch” for the company ahead of the most important holiday season.

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The Chinese financial markets, at times, appear disconnected from reality. Investors hoping for a change in policy are pouncing on any information, often rumours or thinly sourced reports, sending the markets on a roller-coaster ride.

Rosy reports from Wall Street banks, pointing to the opportunity for rewards when China opens up, have also helped to fuel rallies. A report from Goldman Sachs this week predicted that Chinese stocks could jump by 20 per cent “on (and before) reopening” from the pandemic.

Often, investors are seizing on official signals, even if the Chinese government isn’t actually revealing much. At a news conference Saturday in Beijing, for example, senior health officials declared that they were “unswervingly” committed to zero-COVID policies, but within reason.

While much of the country remains committed to the zero-COVID strategy, there are signs that the approach is reaching its limit. The financial pressures are mounting on local governments that are running out of money to pay for COVID control measures like mass testing. The social costs, too, are amplifying as more and more people are caught in lengthy lockdowns, their anger, frustration and discontent slipping through internet censors.

The city of Shanghai recently began offering a new inhaled COVID-19 vaccine developed by Chinese pharmaceutical group CanSino Biologics, which officials have said could significantly enhance immunity and appeal to a portion of the population still hesitant to vaccines. More than a dozen cities are expected to offer the vaccine soon.

Two Chinese pharmaceutical companies are close to gaining approval on mRNA vaccines based on technology first developed and approved in the United States. China has also made progress in drafting distribution agreements with foreign drug companies, and developing and acquiring COVID treatments, including a homegrown antiviral pill.

Citing such developments, Zeng Guang, a former chief epidemiologist at the Chinese Center for Disease Control and Prevention, told investors last week that the conditions for China to open up and loosen its policy were improving. His comments, made at a private investor event held by Citigroup, spread quickly online and prompted a rise in financial markets. A spokesperson for Citi declined to comment.

For investors, it is hard to tell whether these small signals will translate into a broader easing of COVID controls, said Richard Harris, the chief executive of Port Shelter Investment Management in Hong Kong.

“They’re trying to play both sides at the same time without giving in on the central cause, which is a COVID-zero policy,” he said.

“China has this boot on the neck of economic activity, and we’re past the point where the boot made sense.”

Jude Blanchette, an expert on China at the Centre for Strategic and International Studies

Many investors are sitting on the sidelines waiting for more concrete evidence.

Winston Feng, the portfolio manager at MassAve Global, said he was looking at how authorities in the southern city of Guangzhou are handling a sudden spike in cases in recent days. Last year, officials responded to relatively few cases with severe restrictions on people’s movements, sending robotic trucks with food into districts under lockdown. This time around, he said, officials have launched mass testing requirements but so far have avoided a citywide lockdown.

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“The nuance here is how much of that experimentation is now being conducted,” Feng said, adding that he expected China to take small measures to reopen but also impose renewed restrictions if needed to bring local outbreaks under control.

“There will be moments,” he said, “when you feel like you’re taking two steps forward, one step back.”

This article originally appeared in The New York Times.

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