China’s Covid policy will hinder property recovery: Goldman Sachs

China’s zero tolerance approach to combating Covid infections will curb the benefits expected from recent measures to support a struggling property market, according to Goldman Sachs Group Inc.

“Because of the Zero Covid policy, all the ongoing property easing might not be transmitted into the property sector recovery,” Hui Shan, chief China economist at Goldman Sachs, said in an interview Wednesday with Bloomberg TV’s Haidi Stroud-Watts and Vonnie Quinn.

The Covid strategy “is a big roadblock for the property sector, for the labor market and a number of aspects of the economy,” she said.

China introduced a series of support measures recently to help bolster the property sector, currently experiencing its worst downturn in modern history. A 16-point package was rolled out earlier this month to help embattled real estate developers, followed by moves to get banks to stabilize financing for developers and construction firms.

Economists have said the measures are a potential game-changer for the property market, although the recovery in sales and investment will likely be slow.

On the Covid policy, Goldman expects China to reopen the country — which it defines as a period when authorities no longer lock down cities when cases surge — in the first half of 2023, Hui said. It will likely be a “difficult and messy” process that will take several months, she said.

Once the country reaches herd immunity for the Covid virus through large-scale infections, consumption is likely to rebound sharply in the second half of the year, and property sector activities will also benefit from the easing measures, Hui said.