(Bloomberg) -- After China announced a sweeping set of changes easing quarantine and testing requirements on Friday, investors across asset classes rejoiced like the controversial Covid Zero playbook had been all but declared over. 

But even as stocks, commodities and the onshore yuan surged, China watchers cautioned that the relaxations may not represent a move toward exiting the country’s zero-tolerance framework. Instead, it may merely reflect top leaders’ efforts to put the strategy on steadier footing so it can endure even longer. 

The 20 measures detailed by China’s State Council and National Health Commission included reducing the period of time travelers and close contacts must spend in centralized quarantine to five days from seven, followed by three days being confined to their home, and ending a controversial flight-suspension system that penalized airlines for bringing in virus cases. It also laid out a framework to rein in mass testing and contact-tracing, promote vaccination, and bolster medical supplies.

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What’s left is a slightly easier regime than before, with less room for local officials to impose over-zealous diktats that have made global headlines. But it’s still the strictest Covid control regime globally, at a time when the rest of the world has resumed pre-pandemic life, and officials have pushed back on the idea they’re relaxing their quest to contain the virus.

“China has introduced these new measures to make our containment more science based and precise. It does not mean that we have relaxed Covid containment or take a laid-back approach,” Foreign Ministry spokesman Zhao Lijian told reporters at a regular briefing Friday in Beijing. “After these measures are introduced cross-border travel will facilitate the business community to come to China for investment and operation.”

Investors were buoyant. A benchmark of Asian equities rose 4.6% and the Hang Seng China Enterprises Index jumped 8.3%, the most since March. The onshore yuan rose as much as 1.7% against the dollar and major commodities rallied. 

Too Optimistic

“Generally the authorities are still very cautious,” said Ding Shuang, the chief economist for Greater China and North Asia at Standard Chartered Plc. “The 20 measures are mainly meant to rectify the overreactions but steps such as the shortening of quarantine days are actually quite slow-paced.”

The changes coincide with China’s daily Covid tally topping 10,000 for the first time since April, with outbreaks worsening in some of its biggest cities including Beijing and Guangzhou. Millions of people across the country are currently under varying degrees of restrictions and it’s unclear how officials on the ground will finetune their rules to fall in line with the new directives while bringing flareups under control. 

Some market interpretation of the news was “too optimistic,” Bruce Pang, chief economist and head of research for Greater China at Jones Lang LaSalle Inc., said. “The Covid policy will only be fine-tuned in the short term, with the focus shifting between eliminating cases and making more precise measures.”

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Guangzhou had emerged a potential early example of using more targeted measures, taking an unexpected light-touch approach even as its daily new infections climbed past 2,500. The southern metropolis has so far avoided a city-wide shutdown, instead imposing  curbs in three of its 11 districts, and held off school suspensions for days. 

But the public’s fear of the virus -- fueled by almost three years of propaganda -- is so deep-rooted that many people often stay at home of their own accord, dealing an economic blow to cities regardless of what rules are in place. 

“They deeply believe the virus will kill a lot of people,” said Jin Dong-yan, a virologist from the University of Hong Kong. “The policy changes are in a right direction. But if you want China to reach the endgame immediately, that’s not possible. China is moving ahead, at least by a small step, addressing the most chaotic and messy areas of the Covid rules.” 

Vaccination

China also can’t fully open up without its elderly, the most at risk of dying from Covid and who hold deeply-entrenched resistance to vaccinations, get their shots. Just over 86% of China’s seniors above the age of 60 are fully vaccinated and the cohort’s booster coverage is still low, at 68%.

The inclusion of the need to boost that rate in the 20 measures, as well as a push to stockpile Covid treatments, are encouraging signs as they could form part of a transition plan toward normalcy, said Benjamin Cowling, chair of epidemiology from the University Hong Kong. 

But the most significant indication of when China will exit Covid Zero would be scrapping mass tests of entire cities, he said. One of the new measures announced Friday asked officials to refrain from mass testing, but still permits it when transmission chains are unclear. 

“Universal testing is the key of zero Covid. Because if you’re transitioning away, you don’t need to count cases anymore,” he said. “You would worry about severe cases and the pressure on the hospital system.”

--With assistance from Jinshan Hong, Yujing Liu, Fran Wang and Colum Murphy.

©2022 Bloomberg L.P.