What happened
Shares of Zhihu (ZH -0.31%) are soaring 23.6% Tuesday morning at 10:51 a.m. ET as the possibility grows that China will end its draconian zero-tolerance COVID lockdown policies. Health authorities reported an increase in senior vaccination rates, which could be a signal for the government to reopen the economy.
Protests have been breaking out in major cities all across the country over the repressive policies that have forced people to remain indoors, not venturing forth even for food. Chinese citizens have begun fighting back and clashing with police as a result, in what some have called the biggest opposition to the Chinese Communist Party's rule since Tiananmen Square.
Image source: Getty Images.
So what
Zhihu is an online content company that enables community members to post and respond to questions. Yet Beijing tightly censors what can appear online, which is one reason virtually all major U.S. social media companies have little to no presence in China -- it's difficult to find references to the Tiananmen Square massacre, for example.
With the crackdown on freedom of movement in cities, Zhihu's business model, which relies on advertising, is threatened. For the seventh-largest social media site in China, a relaxation of the government's restrictive policies would be beneficial to renewed growth.
Now what
Zhihu is scheduled to report third-quarter results tomorrow before U.S. markets open. Those results probably aren't going to be especially good ones, as Zhihu CEO Yuan Zhou has said that COVID restrictions are proving particularly difficult to navigate, and he warned after the company's second-quarter results that "there is no clear sign of recovery just yet."
