china’s pivot away from three years of strict covid restrictions cheered investors but the country’s resulting surge in infections means the economic news may get a lot worse in the coming weeks the world health organization has said it is “very concerned” about the evolving situation in china and rising reports of severe disease despite signs of strain on china’s medical system and reports of people scrambling for medicine as covid cases in major cities surge china’s reported number of deaths has been low that’s raising questions about the quality of the data and the true toll of the pivot economists are seeking out other proxies to gauge the impact in a note to clients capital economics’ china economist sheana yue says the rapid rise in infections has curtailed inperson activity even further with alternative economic gauges leading her to estimate the pace of yearoveryear economic contraction deepened to almost 7 in november from 4 in october much of the hit is being felt in the services sector with activity an estimated 5 below 2019 levels even as restrictions are eased according to yue that’s not helping consumer confidence which was already in the dumps and is showing up in demand for bigticket items like cars and even household goods though china’s abrupt pivot from zerocovid and increased stimulus should set china up for a recovery in the second or third quarter early indications show that it could be a messy couple of months many companies are seeing worse conditions now than with zerocovid in place and high frequency data show fewer people traveling around china’s cities yue says plus companies now face the risk of sick workers causing its own disruptions—all of which feeds into yue’s expectation china’s economy will shrink 25 this year even more than her original forecast of 2 and grow only 2 off the weak base beijing didn’t have much choice but to pivot from zerocovid given its increasing strains on the economy and indications it couldn’t be sustained with the spread of a more transmissible omicron michael pettis peking university finance professor and globalsource partners country analyst wrote in a note to clients that’s left the pivot likely exacting a painful nearterm toll but pettis sees the benefits of the reopening coming to the economy earlier than otherwise and allowing china to meet a 5 gdp growth target in a “high quality” way—driven by increased consumption and business investment rather than debtfueled construction or infrastructure projects  but he cautions in reading too much into what will likely be a better year for china’s economy “even if china exceeds its gdp growth target this good news is only relative and represents a small reversal of the damage done to the economy in the past three years” pettis says “what seems like a very good economic performance in 2023 will mostly be a partial reversal of the terrible economic performance of the previous year and that will have all dissipated well before 2024 after which we are back to the same old highlyunbalanced—and unsustainable—growth model” bargain hunters may want to brace for some harsh developments in next couple of weeks—and be willing to be nimble on the way out as well if the economic boost proves to be nothing more than a shortterm sugar rush