● The end of zero-covid will have an impact on growth and inflation globally.
● “China’s reopening is happening faster and earlier, and so is its recovery”
China is suddenly reopening after three years of lockdown rest Strict covid restrictions. Mainland China has opened sea and land crossings, with Hong Kong dismantling the last pillar of a zero-Covid policy that shielded 1.4 billion Chinese residents from the virus.
In a Tuesday report, Citi’s chief China economist Xiangrong Yu said:
“We’re watching markets and policymakers go through the readings as they eye the strength and stability of China’s post COVID recovery. The reopening is happening faster and earlier, so may the recovery.”
After historic protests, one of the world’s strictest COVID regimes eased a policy that included restrictions on movement, repeated testing, and mass lockdowns that battered the world’s second-largest economy .
While the effects of the pandemic have hit the Chinese economy hard, there are signs that the disruption is rapidly easing. Some indicators suggest that soon the peak of the transition will pass, the labor shortage will abate and customers will start spending again. Consultancy firm Capital Economics expects the country to register a growth of 5.5% this year as compared to 3% last year.
A resurgence in China’s pent-up consumer and investment activity will boost global demand as Chinese tourist destinations in East and Southeast Asia reopen, benefiting goods exporters. The growth in bookings on travel websites signals a potential recovery in global spending by Chinese tourists, which totaled $225 billion in 2019. as china supply 15% of the world’s exports, with strong demand is likely to pressure the global supply chain. Additionally, the country’s recovery will also give a boost to metal and energy exporters.
However, Liu He, the country’s vice prime minister, noted In a keynote address at Davos that:
“If we work hard, we are confident that China’s growth will return to its normal trend in 2023, and the Chinese economy will see a significant recovery.”
Higher demand may add to global price pressures. according to feetIron, copper, ore, and other metals prices exposed to China’s asset sector recently frozen, In Europe, there could be implications for the energy supply. Douglas Peterson, chief executive of S&P Global, said that
“There are pent-up savings, and there is pent-up demand, so there are expectations that China will see solid growth later this year as we anticipate net growth globally this year.”
Last year, the EU built up gas reserves mainly by importing liquefied natural gas, despite shutting down major pipelines. If Chinese LNG demand returns, prices will rise, and gas competition will intensify with shortages in Europe.
China’s dream of revival
China is an important discussion topic for many on Twitter, including Justin Sun, the self-proclaimed billionaire and polarizing character who founded the Tron space. Sun signaled his appreciation of China’s reopening, pledging to be a long-term partner in China’s success. The self-proclaimed billionaire didn’t explicitly talk about digital assets in his thread, but given their history, it’s hard to interpret otherwise.
Chinese government investment and China’s reopening will undoubtedly support commodity prices and strengthen the global economy. This in turn could spur a return to more risk-sensitive assets, including cryptocurrencies and equities. According to analysts, if a global recession can be avoided and the dollar weakens, the digital asset could be a winner.
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